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Nigerian economy going into recession, might contract by -8.9% – Finance Minister

Zainab Ahmed admitted that the crash in crude prices would negatively affect the country’s revenue and foreign exchange earnings.

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The Nigerian economy is expected to record negative growth as it slides into recession, due to the outbreak of the coronavirus pandemic and crash in oil prices.

This was disclosed by the Minister for Finance, Budget and National Planning, Zainab Ahmed, during a press briefing after the first virtual meeting of the National Economic Council (NEC), which was chaired by Vice President, Yemi Osinbajo.

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The minister said that the ravaging coronavirus pandemic is not only affecting the country economically, but also affecting the health sector, as the resources to fight this appear inadequate.

She admitted that the crash in crude oil prices would negatively affect the country’s revenue and foreign exchange earnings.

(READ MORE: Industries with low exposure to COVID-19)

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This oil price crash and coronavirus pandemic outbreak has also affected the economic growth of the country and weakened the naira.

According to the Finance Minister, “Net oil and gas revenue input to the federation account in the first quarter of 2020 amounted to N940.91 billion. This represents a shortfall of N125.52 billion.

‘’But with the work that the Economic Sustainability Committee is doing bringing up a stimulus package, we believe that we can reduce the impact of that recession.”

Going further,Zainab Ahmed said, “And if we apply all that have been proposed and we are able to implement it we might end up with a recession that is -0.4%. But in any case, we will go into recession but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021’’ 

READ ALSO: External reserves to fall below $30 billion, more forex restrictions expected

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READ MORE: Emefiele insists CBN will not sell forex for importation of items produced in Nigeria

According to news from Channels Television, Ahmed also disclosed that the economic growth in Nigeria could contract by as much as -8.94% in 2020 in the worst-case scenario. She also said that in the best-case scenario, it could be a contraction of -4.4%, if there was no stimulus and 0.59% contraction if there was a fiscal stimulus package.

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.

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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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