The Nigerian economy is melting away from the combined pressure of the COVID-19 pandemic and the fall in crude oil prices. It is barely one month since the heat started and we have seen one round of naira devaluation, a spike in consumer good prices and a dent in government revenues. Ironically, things could get better.
In a rather twist of fate, the global spread of the virus and a fear for another surge later in the year could limit travel plans for dollar hungry Nigerians easing pressure on the already troubled naira.
Reports from several health research organizations predict there could be another wave of Coronavirus contagion even as reported cases subside in some of the hardest-hit countries. This suggests travel restrictions could remain for the foreseeable future.
What the data says
Data from the Central Bank of Nigeria (CBN) statistical bulletin reveals Nigerians spent a whopping $12 billion on personal and business travel allowances in 2019, higher than the $7.6 billion spent in 2018. Nigerians also spent another $6 billion on education-related expenditure during the year. Nigeria’s dollar demand is mostly from the services sector accounting for a total of $33.7 billion in 2019, compared to $26 billion in 2018. This demand could fizzle away if prediction from health experts come through, even as the world gears up for another contagious economic crisis.
This could thus present a surprise boost for Nigeria, as the lack of demand could help cushion the impact of the crash in oil prices, which has severely dented the government’s revenue earnings. With the exchange rate already devalued, economists expect a significant rise in inflation rate further denting the purchasing power of consumers.
A recent bit of irony has already been experienced after the government twice reduced the price of petrol as global crude oil prices crashed and demand for oil plummeted due to COVID-19.
Why it’s possible
A recent report by Mckinsey on the impact of COVID-19 on the Nigerian economy also reveals consumer demand will be weakened by “reduced household and business consumption due to restricted movement, travel ban, and the knock-on effects of reduced government expenditure.”
The report also opines that the “Reduction in number of people travelling because of health concerns” will resort in weaker consumer expenditure.
Job losses are also likely to rise in the coming weeks and months as employers stare at another round of weak economic growth that could once again lead to another recession or worse still, stagflation.
Stagflation is when a country is witnessing weak economic growth yet inflation is rising. Nigeria faced this situation in 2016 when it fell into a recession. Mckinsey also weighed in on job losses. “Actual (and expected) health costs and job losses could lead to deep cuts in discretionary spending and trade downs in non-discretionary spending.”
Another critical factor that could go the way of the naira is the huge supply chain disruptions expected to subsist over the next few months and post-Coronavirus pandemic. Importers have complained bitterly of a major disruption to their supply chains as they cannot import critical goods and inputs required for local manufacturing and assemblage. This bit of a problem could also impact on the demand for the dollar helping the central bank to hold on to its reserves.
The elephant in the rooms still remains; with foreign investors yet to sell-off their entire holdings of debt and equity securities, there could still be downward pressure on the exchange rate. Nigeria’s central bank governor will surely welcome this pressure if it is the only one, he has to deal with in this trying times.
Godwin Obaseki wins Edo State governorship election
Incumbent governor, Godwin Obaseki emerged winner in the Edo State gubernatorial election.
Independent National Electoral Commission(INEC) has declared Godwin Obaseki the winner of the Edo State gubernatorial election today.
Mr. Obaseki will return as the Governor of the state for a second term.
The results were declared by INEC on Sunday afternoon after the results were counted from all LGA’s on Saturday.
Obaseki had 307,955 votes, which was enough to be declared a clear winner over Ize-Iyamu’s 223,619 votes.
Obaseki took to his Twitter handle to thank the people of Edo State for their votes. He stated,
“Words fail me in saluting our teeming supporters who displayed immense courage in the face of threats, intimidation and brutalization. The collective will of Edo people made it possible for us to triumph over godfatherism. Congratulations to all Edo people. This is our victory!”
Words fail me in saluting our teeming supporters who displayed immense courage in the face of threats, intimidation and brutalization. The collective will of Edo people made it possible for us to triumph over godfatherism. Congratulations to all Edo people. This is our victory! pic.twitter.com/4X4Lfk3wMb
— Godwin Obaseki (GGO) (@GovernorObaseki) September 20, 2020
WTO: Okonjo-Iweala still in contention as 3 candidates depart race for DG
Okonjo-Iweala and the remaining 4 other candidates hope to succeed the current DG, Mr Roberto Azevêdo.
Three candidates running for the post of the Director-General of the World Trade Organisation have fallen out of the race after failing to secure enough votes in the first rounds of voting, leaving only 5 candidates left, including Nigeria’s Ngozi Okonjo-Iweala.
This was disclosed by Bloomberg on Thursday, before the meeting on Friday. The Candidates that are out of the race are Jesus Seade (Mexico), Tudor Ulianovschi (Moldova), and Hamid Mamdouh (Egypt). The candidates were not able to secure the support needed for the first round of 3 rounds of voting.
Dr. Ngozi Okonjo Iweal joins 4 other candidates for the next round of voting. The candidates are; Liam Fox (UK), Amina Chawahir Mohamed Jibril (Kenya), Yoo Myung-hee ( South Korea), and Mohammad Maziad Al-Tuwaijri ( Saudi Arabia).
Ngozi Okonjo-Iweala disclosed last month some of her plans for the Organization if made President. Nairametrics reported she noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.
On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:
“Well, this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’’
She added she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.
“You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members,’’ she said.
Okonjo-Iweala and the 4 other candidates will present themselves to the members of the global trade body for the later stages of voting in the hopes of securing the highest number of votes to succeed the current DG, Mr. Roberto Azevêdo.
FG to establish a new anti-corruption agency
Malami disclosed that the new anti-corruption agency would be called Proceeds of Crime Recovery and Management Agency.
The Federal Government has approved the establishment of a new anti-corruption agency that will have the responsibility of properly managing and coordinating all assets seized domestically or returned from abroad, following anti-corruption probes.
The disclosure was made by the Attorney General and Minister for Justice, Abubakar Malami, while briefing state house correspondents after the Federal Executive Council (FEC) meeting on Wednesday, September 16, 2020.
Malami explained that the recovered assets had been scattered across several agencies and that better coordination would encourage international/overall coordination in recovering more looted assets.
Nigeria has repatriated well over $300 million of looted funds this year alone and seized about $40 million worth of jewellery belonging to the former Minister for Petroleum, Diezani Allison-Madueke. This is in addition to the seized ill-gotten properties and real estate.
The Attorney General said that this new initiative would create a one-stop-shop for managing seized assets in an open and accountable way. He called the plan the next level of transparency and said the agency could also give the Ministry of Finance, Budget, and National Planning a budget for recovered assets.
He disclosed that the new anti-corruption agency, which would be called Proceeds of Crime Recovery and Management Agency, is to be saddled with the responsibility of managing the assets that constitute the proceeds of crime in the country. He said that the FEC had approved the transmission of a bill, ‘Proceeds of Crime Recovery and Management Agency Bill,’ to the National Assembly.
Malami noted that setting up an agency like this had become quite imperative in a bid to consolidate on the gains achieved so far in the government’s war against corruption.
The fight against corruption in the country has not been an easy one, as even a US senator, Chuck Grassley, earlier this year, raised concerns about the return of money due to worries over whether there were proper safeguards to prevent further misappropriation or relooting of those recovered funds.
The Economic and Financial Crime Commission (EFCC), which currently has the responsibility of managing its recovered or seized assets, has been bedevilled by a lot of controversies recently, following the accusation and subsequent suspension of its Ag. Chairman, Ibrahim Magu.
This follows the Minister of Justice’s accusation of the agency for diversion of funds that had been recovered during corruption investigations.