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Nigeria’s economic growth lower than non-oil dependent nations- IMF

Nigeria continues to perform worse off when compared to other economies of the world that are dependent on other export commodities/sectors.  

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The International Monetary Fund has rated Nigeria’s economic growth lower than other oil-dependent countries across the globe.

IMF disclosed this in a policy paper on macroeconomic development and prospects in Low-Income Developing Countries (LIDCs), adding that this has been a concern since oil prices fell in 2014.

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The LIDCs are a group of 59 IMF member-countries primarily defined by income per capita level below a certain threshold (set at $2,700 in 2016).

“The LIDCs are expected to record average annual growth of some 5% in 2018-2019, a reasonably robust performance against the backdrop of loss of momentum in the global economy,” IMF said.

Kristalina Georgieva, IMF boss hints at 'synchronized slowdown' in global growth , IMF: 40% of African countries can't pay back their debts , Nigeria worse off, posts grows lower than LIDC benchmark - IMF

Kristalina Georgieva

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Meanwhile, IMF has attributed poor growth in the oil-dependent economies to fragile situations in the economies. The global body expects a more positive outlook for the LIDCs in 2020, with the countries expected to grow marginally.

“Looking ahead, growth is expected to pick up marginally in 2020 and beyond, although risks to the global economy threaten this outlook,” the IMF said and reported by Punch.

[READ MORE: Nigerian LDR policy weakens banks’ balance sheets, IMF says]

Recall as earlier published on Nairametrics, the Central Bank of Nigeria expects Nigeria’s economy to grow to 2.38% in Q4 2019.

Meanwhile, the National Bureau of Statistics had disclosed that the Nigerian economy had grown by 2.28% in real terms in the third quarter of 2019, compared to 2.12% in Q2 and 2.10% in Q1. The marginal growth in the country’s economy can be attributed to improved oil revenues.

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Another concern of IMF is the upward movement of the public debt profile of the LDICs. Though public debt considerably slowed in 2018 and 2019, it retains an upward trend.

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The global lender added that public debt vulnerability remained a serious issue as more than two-fifths of countries assessed are reportedly at high risk of, or already in, debt crisis.

Debt levels in several countries (notably fuel exporters) fell sharply on fiscal tightening and recoveries of GDP and/or real exchange rates (which boosted dollar-equivalent denominators). An important exception is Nigeria, where the debt to GDP ratio continued to increase.

“Among fuel exporters, current account deficits narrowed over the period, helped by the recovery in export revenues — except in Nigeria, where recovery in import levels dominated a transitory increase in export revenues in 2018 on the back of higher oil prices.

 “Nigeria is an outlier in this context, with the fiscal position, though improving, still significantly weaker than in 2010-2014 (the era of high oil prices),” the IMF said.

[READ ALSO: Nigeria’s debt still below average, IMF warns]

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Meanwhile, the Nigerian government has maintained that the country is not heading for debt crisis, let alone being in a debt crisis, though the country’s debt stock is over N25 trillion and Debt to GDP stands at 28%

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Coronavirus

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.

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Lagos state governor issues new guidelines for lockdown, consider full reopening of its economy

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.

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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.

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“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.

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Coronavirus

FG may lift ban on interstate movement on June 21

Interstate movement may resume on June 21.

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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.

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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.”

 

READ ALSO: U.S dollar gains, America sanctions Chinese Airlines from flying into the U.S.

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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.

READ ALSO: Osinbajo sets up committee on reopening of Nigerian economy, suspends loan deductions for states

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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.

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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.

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Business News

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.

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PPPRA, NNPC, Reduce funding oil subsidy - IMF to Nigeria , Oil marketers, PENGASSAN call for subsidy removal 

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.

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READ MORE: The good, bad and ugly of low oil prices for Nigeria

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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