- Nigeria’s Economic Outlook for 2019
Nigeria’s economic outlook remains challenging in 2019 as investment inflows and revenue generation are projected to drop further in the new year.
The economy grew at 1.81 percent in the third quarter of 2018 after a 1.5 percent expansion in the second quarter but the unemployment rate rose to 23.1 percent from 18.8 percent recorded a year ago. A sign the economy is merely sustaining growth after recovering from the recession in 2017.
Despite growing for six consecutive quarters, new job creation is almost nonexisting and interest rate remained unchanged at 14 percent. Still, the manufacturing sector recorded growth for the 18th consecutive month without new jobs or substantial new entrants to broaden growth.
One of the key factors in measuring the healthiness of an economy, the stock exchange market, returned -15.39 percent in 2018 while the national foreign reserves dropped to $43 billion on weak capital importation.
Rising interest rates in developed economies will continue to hurt capital inflow into emerging markets like Nigeria in 2019, especially with the European Central Bank likely to raise rates in the new year after announcing an end to its asset-buying program.
Global Economy and Impacts in 2019
The trade war between the U.S and China, the two world’s largest economies, should slow down global growth in 2019 but as China continues to adjust its policy to accommodate U.S. demands for an open market, global growth should pick up and expand at about 3.5 percent in 2019, down from 3.7 percent in 2018.
While the four rate hikes in the United States, the two from the United Kingdom since the recession and Canada’s five times rate increase since summer of 2017 boosted capital outflows from Nigeria and other emerging economies in 2018. The trend is expected to continue in the first half of 2019 but into the Euro-area ahead of the European Central Bank rate increase.
Global oil market remains largely uncertain in 2019 due to the projected slow down in China’s economy, the world’s largest importer of crude oil. But with Saudi Arabia and Russia led OPEC+ recent accord to cut production by 1.2 million barrels a day, Brent crude may average $70 a barrel in the first half, however, that should fade in the second half of the year as U.S. producers sustain output at about 12 million barrels a day.
Nigeria’s Economy 2019
The labour market remained weak with low new job creation and shrinking existing jobs, the trend is expected to continue in 2019 and up until the second half of 2020 when new policies would have crystalised and interest rate lowered.
The Central Bank of Nigeria left interest rate unchanged at 14 percent, citing weak investment inflow and rising consumer prices. But with Dangote refinery scheduled to commence operation in 2020, the CBN would have more liquidity to stimulate growth and lower interest rates enough to support new jobs.
Therefore, the unemployment rate is projected to increase from the current 23.1 percent in 2018 to 25 percent by the third quarter of 2019 and start moderating by the second half of 2020.
Gross Domestic Product
OPEC+ production cuts and weak capital inflows will weigh on Nigeria’s economic productivity in 2019. Nigeria’s oil production is expected to be capped at 1.685 million barrels a day in 2019, this should reduce foreign revenue generation and impact Central Bank of Nigeria’s forex intervention program that has sustained economic activities in the last two years.
Despite crude oil production rising to 2.09 million barrels a day in 2018, growth remained lackluster with 20.9 million unemployed people and 43.3 percent national unemployment and underemployment rate. At a lower production level with a drop in investment inflow and high capital outflow, economic productivity is projected to slow down in the first half of 2019 and remained largely unchanged in the second half of the year when new administration would have been sworn-in.
Also, investment inflow and market sentiment are expected to start picking up by the second half of the year when implementation of the 2019 budget would have commenced.
However, analysts at Investors King Limited said: “The problem with the 2019 budget is that 71.34 percent of the 2019 budget will be spent on recurrent expenditure, 18 percent higher than 2018 budget. While non-oil revenue is expected to rise by just 0.1 percent in 2019.”
“In an economy that is likely to experience a drop in revenue in 2019 due to OPEC+ production cuts agreement, weak revenue generation amid huge capital expenditure that over the years has failed to stimulate new job creation and enhance economic productivity is the number one problem of the 2019 proposed budget.”
Illegal Withdrawals: Rep To Investigate NNPC, NLNG Over $1.05bn
Rep To Investigate NNPC, NLNG Over Illegal Withdrawal of $1.05bn from NLNG Account
The Nigerian House of Representatives has concluded plans to investigate illegal withdrawal of $1.05 billion from the account of the Nigerian Liquefied Natural Gas Limited (NLNG) by the Nigerian National Petroleum Corporation (NNPC).
The decision followed the adoption of a motion titled ‘Need to Investigate the Illegal Withdrawals from the NLNG Dividends Account by the Management of NNPC’ moved by the Minority Leader, Ndudi Elumelu, on Tuesday.
The House adopted the motion and mandated its Committee on Public Accounts to “invite the management of the NNPC as well as that of the NLNG, to conduct a thorough investigation on activities that have taken place on the dividends account and report back to the House in four weeks.”
Elumelu said, “The House is aware that the dividends from the NLNG are supposed to be paid into the Consolidated Revenue Funds account of the Federal Government and to be shared amongst the three tiers of government.
“The House is worried that the NNPC, which represents the government of Nigeria on the board of the NLNG, had unilaterally, without the required consultations with states and the mandatory appropriation from the National Assembly, illegally tampered with the funds at the NLNG dividends account to the tune of $1.05bn, thereby violating the nation’s appropriation law.
“The House is disturbed that there was no transparency in this extra-budgetary spending, as only the Group Managing Director and the corporation’s Chief Financial Officer had the knowledge of how the $1.05bn was spent.
“The House is concerned that there are no records showing the audit and recovery of accrued funds from the NLNG by the Office of the Auditor-General of the Federation, hence the need for a thorough investigation of the activities on the NLNG dividends account.”
FG Gives Radio, Tv Stations Debt Relief, Writes Off 60 Percent Debt
FG Reduces Tv, Radio Stations Licence Fee by 30%, Writes Off 60% Debt
The Federal Government has reduced the existing licence fee paid by all open terrestrial radio and television stations by 30 percent.
The Minister of Information and Culture, Lai Mohammed, disclosed this at a press conference in Abuja on Monday.
He said the Federal Government has also decided to write off 60 percent of the N7 billion loan owed the government by television and radio stations.
He explained that the N7 billion is the total outstanding from television and radio stations on the renewal of their operating licences.
Mohammed, however, said for any station to benefit from the 60 percent debt relief, such a station must be ready and willing to pay the remaining 40 percent within the next three months.
According to him, the debt relief offer would open on July 10th and close on the 6th of October.
Mohammed said, “According to the NBC, many Nigerian radio and television stations remain indebted to the Federal Government to the tune of N7bn.
“Also, many of the stations are faced with the reality that their licences will not be renewed, in view of their indebtedness.
“Against this background, the management of the NBC has therefore recommended, and the Federal Government has accepted, the following measures to revamp the broadcast industry and to help reposition it for the challenges of business, post-COVID-19:
“(a) 60 per cent debt forgiveness for all debtor broadcast stations in the country; (b) the criterion for enjoying the debt forgiveness is for debtor stations to pay 40 per cent of their existing debt within the next three months.
“(c) Any station that is unable to pay the balance of 40 per cent indebtedness within the three-month window shall forfeit the opportunity to enjoy the stated debt forgiveness.
“(d) The existing license fee is further discounted by 30 per cent for all open terrestrial radio and television services effective July 10, 2020.
“(e) The debt forgiveness shall apply to functional licensed terrestrial radio and television stations only. (f) The debt forgiveness and discount shall not apply to pay TV service operators in Nigeria.”
Nigeria’s Inflation to Average 12.2 Percent in 2020 Says PwC
PwC Says Inflation Will Average 12.2% in 2020
PricewaterhouseCoopers (PwC) has predicted that the nation’s inflation rate will average 12.2 percent in 2020.
In the report titled ‘Demand and supply shocks from COVID-19 keep inflation higher for longer’, the company based its projection on the rising cost of goods and services due to the supply shocks to commodity and the COVID-19 negative impacts on the economy.
The report explained that the supply disruption brought about by lockdown measures put in place to mitigate COVID-19 spread pushed headline inflation to its highest in 23 months in the month of May 2020.
Nigeria’s headline inflation rose by 12.4 percent year-on-year in the month of May. Its fastest pace of increase in 26 months, according to the National Bureau of Statistics (NBS).
However, PwC said because of the growing global uncertainty due to the projected second wave of COVID-19 and declining household incomes, headline inflation will increase from the average of 11.4 percent recorded in 2019 to average 12.2 percent in 2020.
“Barring a second wave of the pandemic, which could further threaten outlook for global economic growth, coupled with the absence of major shocks to food supply in Nigeria, inflation outlook for rest of the year could be influenced by two factors. Firstly, the elevated base effect, and secondly, waning household incomes. The first factor is likely to have a greater impact.”
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