Bismarck Rewane, the Chief Executive of Financial Derivatives Company Limited, has questioned the monthly Purchasers’ Manufacturing Index (PMI) released by the Central Bank of Nigeria (CBN).
Also, as financial experts continue to react to the latest Gross Domestic Product (GDP) data released by the National Bureau Statistics, Rewane, has also disclosed that the federal government needs urgent policy measures as the country’s economic performance in Q2 was “lacklustre”. He is of the view that the country should be expecting some critical times ahead.
The details: Speaking on a monitored programme on CNBC Africa, the director disclosed that while he did not expect anything more from the performance of the Nigerian economy in the second quarter, it shows the presence of a recessionary gap, which means the economy is growing below its potential.
When asked if he was disappointed in the country’s GDP, Rewane disclosed;
“To be disappointed is to have expected more than what happened, but it’s still lacklustre. It confirms the existence of a recessionary gap, because potential GDP is higher than real GDP. It also shows the potential problem of a growing population rate of 2.7% as against 1.94%.
“But more important is that the job elastic sectors, the sectors that actually employ people all of them without exception suffered set back.
“From agriculture which dropped from 3.17% to 1.79%, slowing, to manufacturing to trade and real estate. Trade (wholesale and retail) employs over 18% of Nigeria’s population.
“Real Estate after three years of languishing came out in Q1 positive, and has now dropped all the way to -3.24. That is a killer.”
A twist in CBN report: On the other hand, Rewane questioned why the CBN PMI would show expansion in the manufacturing sector between April and June, while the sector contracted during the same period. On the other hand, FBN Quest PMI conforms to the contraction in the manufacturing sector during the same period.
According to Rewane, there may arise a big question over the data integrity of what the CBN shun out.
“What is more interesting is, if FBN PMI is a valid predictor of output, it went down from 56 points in April to 50.9 in May, to 49.9 in June. Meanwhile, in these three months, the central bank’s PMI went in the other direction. So, there is a question about data integrity.
“Some people (CBN) would just go to the moon, come back and release some numbers. Some actually have data. So, data integrity is very important.”
Government failure: When asked if the CBN policy to force Deposit Money Banks (DMBs) to redirect loans to the real sector requires time to materialise, Rewane snapped;
“Fiscal business has nothing to do with monetary policy. The fiscal authorities are the ones to stimulate growth. Lower taxes, incentives, behaving properly (not harassing investors), creating an atmosphere of certainty rather than uncertainty, those are the things that bring about investment and investment multiplier.
“We are not getting enough investment, both domestic and international. Trying to substitute fiscal solutions with monetary interventions, those are bound heads, palliatives, they go nowhere.
“You can’t fake prosperity, you either have prosperity and the opposite is a hardship. We have enough challenges as it were, we were not going to substitute fiscal interventions to monetary interventions.
“For 12 months, we have not released our unemployment data, I can bet you, those numbers are going to come closer to 30% above the current 23% in Q3 2018.”
The financial expert disclosed further;
“Since we closed the borders, all the tanks are full and saturated with petrol, which means we don’t consume 60 million litres a day of fuel, we hardly consumer 30 million litres, that fraud and fallacy called 60 million litres of which part of it goes outside the country and the other half does not even come in, and people get money at N305 and bring it back, that scam must stop.
“The fiscal problems are not farfetched, very simple. Understand one thing, a mixed economic module, is better than the controlled economy. Accept a mixed economic module, where the pricing of these products and factor prices are driven partly by market forces, and in order sense some interventions by the government to achieve a mixed module.”
Some Positives: Meanwhile, Rewane stated that the Q2 GDP was not entirely bad as several other factors must have been responsible for the slow growth recorded.
According to Rewane, “even though it is 1.94%, this is the highest quarterly growth in the last three years. So, compared to in terms of seasonality. Also, this is the Q2 in which there was no cabinet, post-election blues, planting seasons. IMF has revised its GDP projection to 2.3%. So it means for Nigeria to attain that, we need to chunk out GDP growth around 2.4% in the next two quarters. If we actually disappoint in Q3, then we are done.”
Lagos to open churches, mosques from June 19, limits gatherings to 40% capacity
Religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
Lagos State government says religious gatherings would be allowed to reopen on June 21, 2020. This was disclosed by the State Governor, Babajide Sanwo-Olu on Thursday during a press briefing at Government House, Marina.
According to the Governor, mosques are to reopen from June 19 while churches are to begin services from June 21 and only Friday and Sunday services should be held for now, as other regular services, including night vigils, must be put on hold.
He said, “There will now be restricted openings of religious houses based on compliance that we have seen and reviewed with the Safety Commission.
“From 14 days time, precisely on the 19th of June for our Muslim worshippers and from the 21st of June for our Christian worshippers, we will be allowing all of our religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
“But we know that these places of worship have different sizes but even if your 40% capacity is really so large, you cannot have beyond 500 worshippers at once, and keeping that maximum 40% capacity is really important.
“We will be encouraging people to have more than one service and ensure that they keep their premises clean, disinfect before another round of worship can take place.
“We will also be advising that there should only be mandatory Fridays and Sunday services. All other night vigils and services must be put on hold for now until we review our current situation.
Sanwo-Olu added that the state will also be advising that persons below the age of 15 because of how well they walk around should be excused from the places of worship and citizens that are above the age of 65 should not be allowed into these places of worship.
FG may lift ban on interstate movement on June 21
Interstate movement may resume on June 21.
The Federal Government may lift the ban placed on interstate movements on June 21, 2020.
This was disclosed by special adviser to President Muhammadu Buhari on new media, Bashir Ahmad on Thursday via his Twitter handle.
He stated, “Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr Dani Aliyu, gave the hint recently, as domestic flights expected to resume on June 21.”
Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr. Sani Aliyu, gave the hint recently, as domestic flights expected to also resume on June 21.
— Bashir Ahmad (@BashirAhmaad) June 4, 2020
Meanwhile, the FG last Monday, June 1, 2020, announced a cautious advance into the second phase of the national response to COVID-19. As part of the measure in the new phase, the FG has announced the full reopening of the financial sector.
This was announced by the national coordinator of the presidential task force on COVID-19, Dr Aliyu Sani. He said that the banks will now be allowed to operate at normal working hours five days a week as against the restricted time of 2 or 3 pm that was announced during the first phase of the easing of lockdown.
The Presidential Task Force also gave the green light to hotels to reopen but must do so based on the guidelines rolled out by the National Centre for Disease Control (NCDC). They are to maintain non-pharmaceuticals intervention. However, gyms, cinemas, parks, nightclubs and bars are to still remain closed until further evaluation.
The restaurants, other than those in hotels must remain closed to eat-ins but are allowed to prioritize and continue to practice the takeaway measure that has been in place since the first phase.
The conundrum in the retail pricing of PMS
Considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol.
The decision of the Petroleum Products Pricing Regulatory Agency (PPPRA) to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, to N121.50 per litre from N123.50 per litre has been met with stiff resistance from oil marketing companies (OMCs). The Independent Petroleum Marketers Association of Nigeria (IPMAN) have also stated that it impossible for its members to sell petrol at the new price floor of N121.5 per litre.
We recall that on 18 March 2020, the Federal Government (FG) reduced the retail price of Premium Motor Spirit (PMS) by c.14% to N125/litre from N145/litre, following the global pandemic which led to an unprecedented decline in oil prices and by extension a reduction in the landing cost of petrol. Subsequently, the FG announced a further reduction to N123.50 which took effect on April 1, 2020. Earlier this month, the FG directed a reduction in the pump price of Premium Motor Spirit (PMS) for the third time to N121.50 per litre. We note that the adjustments in the retail price is in line with the directive from PPPRA on a monthly review of the pump price, depending on prevailing market realities.
In our view, considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol. With the gradual relaxation of lockdown measures by countries who are starting to reopen their economies alongside the historic production cuts of OPEC+ which took effect last month (a 9.7mb/d oil production cut for May and June), we think the risks to oil prices are tilted to the upside in the near term.
Since hitting a two-decade low of US$19.33 on 21 April when the retail price of petrol was pegged at N123.50, brent crude prices have gained c.105% to close at US$39.54 on 3 June. Against this backdrop, we expect that the retail price of petrol should rather be adjusted upwards to reflect current market realities. The current situation appears no different from historical trends where the FG becomes reluctant to effect an upward adjustment in the retail price of petrol during periods of rising crude prices. This has often resulted in the renewed payments of the age-long fuel subsidy. We also think oil marketing companies (OMCs) who have only recently begun to import petrol alongside the Nigerian National Petroleum Corporation (NNPC) due to more favourable pricing could halt importation once again if domestic retail prices become unfavourable.
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