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Covid-19: World Bank discloses when Sub-Saharan Africa will fall into recession

The dreaded Coronavirus pandemic is expected to drive Sub-Saharan Africa into its first recession in 25 years.

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World Bank picks holes in CBN’s policies on lending, MSMEs loans,Covid-19: World discloses when sub-Saharan will fall into recession

The dreaded Covid-19 pandemic, which has significantly spread around the world and caused a lot of disruptions on the global economy, is expected to drive Sub-Saharan Africa into its first recession in 25 years.

This was disclosed in the World Bank’s latest Africa’s Pulse report, a twice-yearly economic update for the region, which was released on Thursday, April 9, 2020.

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The report shows that the forecast for the Sub-Saharan Africa region is expected to decline from 2.4% in 2019 to between -2.1% to -5.1% in 2020.

The forecast came with a recommendation is made for African policymakers to focus on saving lives and protecting livelihoods by strengthening health systems and taking quick actions to minimize disruptions in food supply chains. According to Hafez Ghanem, Vice President for Africa, World Bank:

‘’The Covid-19 pandemic is testing the limits of societies and economies across the world and African countries are likely to be hit particularly’’.

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‘’We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term – including calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with Covid-19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security”

(READ MORE: CBN pays $4.45 billion external debt to World Bank, others in 2-month)

An analysis from the report shows that the COVID-19 pandemic is going to cost the region between $37 billion and $79 billion in output losses this year. Sectors  that will be affected by this includes: trade and value chain disruptions, decline in foreign remittances, tourism, foreign direct investment, foreign aid among others.

Coronavirus Outbreak to Impact Tourism Across African Continent,Covid-19: World discloses when sub-Saharan will fall into recession

The GDP growth in the region, particularly in the 3 largest economies in Sub-Saharan Africa i.e. Nigeria, South Africa and Angola, is projected to decline sharply, due to persistent weak growth and investment.

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The Coronavirus crisis can also potentially cause food security crisis in Africa, with agricultural production expected to contract between 2.6% in optimistic period and as much as 7% during trade blockages.

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Food imports are expected to decline by as much as 25% or as little as 13% due to drop in local demand and high cost of transaction.

(READ MORE: World Bank deploys $150 billion to save the world from global meltdown)

The Bretton Wood institution has pledged about $160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses and aid economic recovery.

Africa has 10,956 confirmed cases of the Coronavirus, with 562 deaths and 1,149 recoveries so far.

The International Monetary Fund (IMF) and the World Bank Group have already rallied for bailout funds and debt relief for the poor and emerging countries as part of measures to help mitigate the impact of lockdowns and restrictions as a result of the coronavirus outbreak.

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Nigeria had also announced its intention to borrow $6.9 billion from the multilateral agencies to help cushion the effect of the Coronavirus pandemic on the country’s economy. A breakdown of that shows that  $3.4 billion will be from IMF, $2.5 billion from World bank and $1 billion from African Development Bank.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- chike.olisah@nairametrics.com.

2 Comments

2 Comments

  1. Richard Ossai Ogu

    April 9, 2020 at 8:07 pm

    Good evening Mr Olisa. Nice to have explain the future aspect of Our Economy. I hope our Government would listen and address the issues raised here. Thanks.

  2. Moonstarboy

    April 9, 2020 at 8:17 pm

    Is very unfortunate that Nigeria is going to fall in this category our leaders need to brace up

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Economy & Politics

Output cut: Nigeria leads in OPEC non-compliance with 50 unsold cargoes of crude

Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.

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Petroleum Industry Bill to be passed by mid-2020, says Sylva, FG discovers crude oil in north, says there’s more , OPEC, non-OPEC countries to meet as Saudi, Russia price war affects Nigeria’s budget, FG considers fuel price reduction, OPEC deal: Nigeria to generate additional $2.8 billion revenue as FG reacts

As opinions continue to differ on whether OPEC will extend its current oil output cut beyond June, available information has shown that not all members of the oil cartel complied fully with their agreed quotas for the month of May. This is despite the fact that the oil output by OPEC member countries reached its lowest in almost 20 years.

Available data from oilprice.com showed that OPEC members cut their output by 5.91 million barrels per day from the April level, producing 24.77 million barrels per day. This figure also showed a 4.48 million barrel per day of the agreed output cut, thereby representing a 74% compliance level.

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Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.

Iraq was able to achieve just 38% compliance of its agreed output cut for the month of May, while Nigeria, which achieved a much lower compliance of the agreed output cut, recorded 19% compliance of what was agreed. Saudi Arabia showed the highest compliance, recording 96% of the agreed output cut.

Some have attributed the noncompliance of some members of OPEC to the agreed output cut, to the contractual obligations and commitment to buyers, given the short timeframe between when the agreement for the output cut was made and its implementation.

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Meanwhile oil exports from Angola and Congo remained steady at high prices on Friday, while Nigerian oil fared lower amid huge inventory of unsold cargoes.

Nigeria continues to face some difficulty in the oil market, primarily due to sluggish demand from Europe; it has around 50 unsold cargoes of crude oil yet to be sold for the months of June and July.

Meanwhile, India has become one of the few buyers for the Nigerian oil. Indian oil firms bought about 5-6 million barrels of Nigerian crude oil last week and has bought about 2 million barrels as at Thursday this week.

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Business News

President Muhammadu Buhari reshuffles NNPC’s board of directors

Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.

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President Muhammadu Buhari to address Nigerians on Monday, receives update and recommendations from PTF

President Muhammadu Buhari has approved the reconstitution of the board of the Nigerian National Petroleum Corporation (NNPC) after the expiration of the tenure of the current board.

The newly constituted board members are expected to serve for a tenure of three years, effective immediately. They will take over from the last board, whose 3-year tenure officially ended in 2019. Information about this development is contained in a State House press release that was published on the official twitter handle of the Nigerian Presidency on Saturday morning.

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READ MORE: Construction of ICT Parks nudges Nigeria into digital transformation

READ ALSO: CBN and NIPOST open pilot microfinance branches

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The newly constituted NNPC board is made up of six members from each of the geo-political zones in the country. The members include the following individuals:

  • Mallam Mohammed Lawal, representing the North West
  • Dr Tajudeen Umar from North East
  • Adamu Mahmood  Attah from North Central
  • Senator Magnus Abe from the South-South
  • Dr Stephen Dike from the South East, and
  • Chief Pius Akinyelure from the South West geo-political

READ MORE: Boko Haram: A protracted battle yet to be won?  

Of the six members, three are returning members on the board – Chief Pius Akinyelure, Mallam Mohammed Lawal, and Dr Tajudeen Umar from North East.

Note that the constitution of the new board is considered a welcome development, as it balances the representation of the six geo-political zones on the board. The previous constitution of the board was faulted for not being “balanced”.

READ ALSO: Full text of President Muhammadu Buhari’s 58th Independence day broadcast

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Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.

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Around the World

Zoom’s market valuation hits $50 billion mark, thanks to COVID-19

Zoom’s share price now trades at an eye-watering 55 times estimated revenue compared with an average of 7 times for information technology stocks in the S&P 500, according to information obtained from Bloomberg.

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Zoom

Zoom Video Communications’ shares surged to record highs on Friday, as bullish runs in the last hours of trading helped the company to close with a market capitalization of more than $50 billion. The stock gained about 9.7% to jump to $179.48, thereby giving it a market value of $50.6 billion. 

Note that this is the first time Zoom’s valuation is reaching this high level since it became a quoted company. The tech giant, which owns popular video conferencing software “Zoom”,  has gained more than 160% this year. This is because investors are betting that the surge in Zoom users amid the COVID-19 pandemic, would eventually translate to long-lasting revenue growth.

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READ ALSO: How VCs are encouraging terrible business practices by founders

Zoom’s share price now trades at an eye-watering 55 times estimated revenue compared with an average of 7 times for information technology stocks in the S&P 500, according to information obtained from Bloomberg.

Following the significant jump in the company’s valuation, the net worth of its founder and Chief Executive Officer, Eric Yuan, also rose significantly by more than $800 million on Friday. He now has a net worth of $9.3 billion, according to the Bloomberg Billionaires Index. 

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Meanwhile, in reaction to Zoom’s overnight success, Gennie Gebhart, a researcher with the Electronic Frontier Foundation, said she hoped Zoom would change course and offer protected video more widely. It should be recalled that some users of the app had raised security concerns back in April, as Nairametrics reported

READ ALSO: Did Satoshi Nakamoto cause the panic sell-off in Bitcoin market

Meanwhile, Zoom has recruited Alex Stamos, a former chief security officer at Facebook, and other top security experts to help deal with the security issues which led to some top companies banning its use. While discussing efforts being made to deal with the security challenges, Stamos told Reuters:

 “At the same time that Zoom is trying to improve security, they are also significantly upgrading their trust and safety. The CEO is looking at different arguments. The current plan is paid customers plus enterprise accounts where the company knows who they are.” 

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