The World Bank has revealed that a slow recovery of the global economy is not an inevitability and can be avoided through productivity-enhancing structural reforms.

This is contained in the Bank’s flagship report – Global Economic Prospects.

The Bank believes structural reforms are capable of offsetting the pandemic’s scarring effects and lay the foundations for higher long-run growth. It agrees that the global economy appears to be emerging from one of its deepest recessions and beginning a subdued recovery, beyond the short term economic outlook, following the devastating health and economic crisis caused by COVID-19.

According to the report, policymakers face formidable challenges — in public health, debt management, budget policies, central banking, and structural reforms, as they try to ensure that this still-fragile global recovery gains traction and sets a foundation for robust growth and development.

Highlights

• Growth in Nigeria is expected to resume at 1.1% in 2021 – markedly weaker than previous projections – and edge up to 1.8% in 2022, as the economy faces severe challenges.
• Investment is projected to shrink again this year in more than a quarter of economies – primarily in Sub-Saharan Africa (SSA), where investment gaps were already large prior to the pandemic.
• Growth in Sub-Saharan Africa is expected to rebound only moderately to 2.7% in 2021 – 0.4% point weaker than previously projected, before firming to 3.3% in 2022.
• Relative to advanced economies, disruptions to schooling have, on average, been more prolonged in emerging market and developing economies (EMDEs), including in low-income countries.

What the World Bank is saying

• “In the longer run, a concerted push toward productivity-enhancing structural reforms will be required to offset the pandemic’s scarring effects.
• “The intended productivity-enhancing structural reforms encompass promoting education, effective public investment, sectoral reallocation, and improved governance. Investment in green infrastructure projects can provide further support to sustainable long-run growth while also contributing to climate change mitigation.”

Are we ready to adjust structurally?

The World Bank has identified key areas that could trigger quick economic recovery. A close look at events in the country appears to suggest that we may be far from ready in terms of adjusting structurally.

A cursory look at the structural adjustment areas suggested by the Bank indicates that in Nigeria, for example, and maybe elsewhere, the single most important factor is improved governance.

All other factors appear to be contingent on this, as the Bank admits that improved governance and reduced corruption can lay the foundations for higher long-run growth. Policymakers and politicians in the country are therefore advised to pay close attention to activities geared towards reduced corruption and improved governance.

Another key area is public investment. Even though most public enterprises and related establishments are usually plagued with corporate governance problems, there are several ways by which the problems could be curtailed.

The issue of education, especially tertiary education, has been problematic with governments failing to meet the demands of university unions, resulting in strikes, almost on a yearly basis. It is hoped that a lasting solution to this springs forth soon.

The Pension Fund Administrators (PFAs) have increased their investments in Federal Government of Nigeria securities by 3.7% to N8.14 trillion in November 2020.

This is according to recent data from the National Pension Commission (PenCom), which revealed that the amount invested by PFAs on FGN securities including; Bonds, Treasury Bills, etc., increased from N7.85 trillion as of October 2020 to N8.14 trillion by the end of November 2020.

Key highlights

The breakdown of the amount invested on various FGN securities within the period under review are:

• FGN Bonds got the lion’s share of N7.38 trillion as of November 2020, accounting for 90.7% of the total amount invested in FGN securities for the aforementioned month. This indicates a growth of 4.3% Month-on-Month.
• Investment in Sukuk bond increased to N100.07 billion in November 2020, up by +6.9% Month-on-Month.
• Investment in Treasury Bills declined to N642.03 billion, down by -1.7% Month-on-Month.
• Investment in Agency bonds also declined to N6.03 billion, down by 50.9% Month-on-Month.
• Investment in green bonds declined to N11.8 billion, down by 10.6% Month-on-Month.
• Investment in state government securities stood at N150.59 billion, down by 2.5% Month-on-Month.

Read Also: Pension Fund Assets hits N9.3 trillion as investment in FGN securities drops

Upshots: The increased investment in FGN securities by PFAs within the aforementioned period might be attributable to an earlier order by CBN which prohibited PFAs from OMO Auctions. The order redirected the investment focus of most PFAs, with many opting for other low-risk FGN securities, possibly explaining why the increase occurred.

What you should know: Nairametrics had earlier reported that CBN had restricted OMO auctions to banks and foreign investors.

• The Net asset value of all PFAs in the country as of November 2020 stood at N12.3 trillion, marginally up by +1.98% Month-on-Month.
• Total RSA registration for the aforementioned period also increased by 0.17% to 9,188,475.

The assets under listing of the Nigerian Stock Exchange ETF market increased to N24.51 billion, as at the end of 2020, indicating an increase of 272%, compared to what was obtainable in similar period in 2019.

This is according to a statement made by the Chief Executive Officer of the Nigerian Stock Exchange, Mr Oscar Onyema, during the recently concluded webinar organized by the NSE, and themed; ‘’NSE 2020 Market Recap and 2021 outlook.’’

Key highlights:

The following are the key highlights of the NSE-ETF market;

• Trading volume increased to 13.02 million units as at the end of 2020, up by +218.23% Year-on-Year.
• Market turnover skyrocketed to N56.66 billion, indicating a massive increase of 51,831% Year-on-Year. This signifies increased interest in Nigeria’s ETF market.

Mr Onyema emphasized that the impressive performance is attributable to a number of factors, such as;

• The unattractive yield in the fixed income market which led investors to seek alternative asset classes.
• The launch of two new ETFs, which are Meristem Growth ETF and Meristem Value ETF.
• The growing adoption of the asset class by investors and asset managers on the back of a strong Year-on-Year growth.

In the same vein, the NSE also announced that one of its subsidiaries – NG Clearing has received approval in principle from the Securities and Exchange Commission (SEC), to launch clearing and settlement of its first Exchange Traded Derivatives (ETDs) as Nigeria’s premier central counterparty clearinghouse.

What you should know:

• According to Investopedia, an exchange-traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies.
• Unlike mutual funds, ETF trades like a stock on the exchange, with a relatively higher daily liquidity and lower fees.
• Based on the 2020 review, the NEWGOLD ETF emerged as the best performing ETF for the second consecutive year posting a return of 66.03%.