Economy
Africa’s Economy to Rebound 5% in 2021—ECA
By Adedapo Adesanya
The economy of Africa is expected to rebound by 5 per cent next year after declining by 4.1 per cent this year, the UN Economic Commission for Africa (ECA) has said in its new report.
In its report tagged Innovative finance for private sector development in Africa, it was stated that the recovery would be supported by effective response to the COVID-19 pandemic and the measures taken globally to aid economic recovery.
According to the report, imported pharmaceutical products in the middle of a pandemic worth $44 billion would be required for the testing, personal protective equipment for frontline medical staff, equipment and treatment of the coronavirus (COVID-19).
In 2020, spending on health will increase as governments set aside funds to sustain their health systems and absorb costs related to the COVID-19 lockdowns.
In a best-case scenario, $44 billion would be required across Africa for testing, personal protective equipment and treatment of COVID-19 patients requiring hospitalisation and intensive care treatment, the report said.
The report further said that due to the resources being redirected to COVID-19, Africa’s existing health challenges will face spillover costs, as happened in the Ebola crisis. It calls on countries to look into investments in non-COVID-19 health issues which should be kept in view.
The impact of the pandemic will push between 5 million and 29 million people below the extreme poverty line of $1.90 per day, compared with a baseline 2020 African growth scenario, according to ECA projections.
Moreover, reduced demand due to COVID-19 has depressed the prices of agricultural commodities such as coffee, tea and cocoa, which is expected to affect vulnerable small-scale farmers in Africa.
The report advocates for investment to build key infrastructure and foster innovation. Despite Africa’s growth, many economies remain unsophisticated or undiversified, due to low levels of innovation, limited productive capabilities, low investment and poor quality of education.
Building capabilities will require investments in human and physical capital.
The report projected that an estimated financing gap of $2.5 trillion will be for all emerging and developing countries and $200 billion– $1.3 trillion for Africa.
This is because Africa’s population is expected to grow by 43 per cent over 2015–2030, the gap could reach $19.5 trillion by 2030.
Meanwhile, climate change is increasing seasonal variability, frequency and intensity of droughts and floods, and shifting habitats and agro-ecological zones due to climate change can cause food insecurity, lower trade balances, raise inflation pressure and fiscal imbalances.
For instance, cyclone Idai, which hit Mozambique in March–April 2019, weakened the economy, took 1,000 lives and caused $700 million–$1 billion in damages to property and other losses.
African economies remained the second fastest-growing region in the world with growth estimated at 3.4 per cent in 2019. The COVID-19 pandemic will impact growth to decelerate to between 1.8 per cent and -4.1 per cent in 2020.
In order to promote the recovery from the COVID-19 impact, the report calls on African countries to regulate their bank sector to limit the possible harm from banking crises or from more general system-wide misallocation of resources.
For the sake of private sector development, the regulation of banks and other sources of capital for funding private industry, such as equity and debt capital markets and digital platforms, needs to be strengthened.
The report noted that the regulations that concern the banking sector alone may be insufficient to safeguard the financial system against some of the risks fintech services pose, such as data privacy, money laundering, mismatched risk and return, and systemic risk.
Africa needs to rethink its financial services regulation so that innovation is fully functional, the environment enables innovation, transparency is enhanced, and financing for private sector development is delivered, the report stated.
These new risks call for financial regulation to be reviewed to provide a flexible environment for fintech to develop that is strict enough to limit the risks. Some African countries have limited fiscal space and international reserves and thus lack the necessary resources to implement COVID-19 responses.
According to IMF data, African countries will record fiscal deficits averaging 5.8 per cent in 2020 and 4.4 per cent in 2021, compared with 3 per cent in 2019.
However, African policymakers’ and regulators’ experience with the 2008–2009 financial crisis and the use of various measures to cushion its impact give them an advantage in rapidly responding to the COVID-19 crisis.
By Adedapo Adesanya
President Bola Tinubu on Friday presented a budget proposal of N58.47 trillion for the 2026 fiscal year titled Budget of Consolidation, Renewed Resilience and Shared Prosperity to a joint session of the National Assembly, with capital recurrent (non‑debt) expenditure standing at 15.25 trillion, and the capital expenditure at N26.08 trillion, while the crude oil benchmark was pegged at $64.85 per barrel.
Business Post reports that the Brent crude grade currently trades around $60 per barrel. It is also expected to trade at that level or lower next year over worries about oil glut.
At the budget presentation today, Mr Tinubu said the expected total revenue for the year is N34.33 trillion, and the proposal is anchored on a crude oil production of 1.84 million barrels per day, and an exchange rate of N1,400 to the US Dollar.
In terms of sectoral allocation, defence and security took the lion’s share with N5.41 trillion, followed by infrastructure at N3.56 trillion, education received N3.52 trillion, while health received N2.48 trillion.
Addressing the lawmakers, the President described the budget proposal as not “just accounting lines”.
“They are a statement of national priorities,” the president told the gathering. “We remain firmly committed to fiscal sustainability, debt transparency, and value‑for‑money spending.”
The presentation came at a time of heightened insecurity in parts of the country, with mass abductions and other crimes making headlines.
Outlining his government’s plan to address the challenge, President Tinubu reminded the gathering that security “remains the foundation of development”.
He said some of the measures in place to tame insecurity include the modernisation of the Armed Forces, intelligence‑driven policing and joint operations, border security, and technology‑enabled surveillance and community‑based peacebuilding and conflict prevention.
“We will invest in security with clear accountability for outcomes—because security spending must deliver security results,” the president said.
“To secure our country, our priority will remain on increasing the fighting capability of our armed forces and other security agencies by boosting personnel and procuring cutting-edge platforms and other hardware,” he added.
By Aduragbemi Omiyale
The deadline for the recapitalisation of the Nigerian pension industry has been extended by six months to June 2027 from December 2026.
This extension was approved by the National Pension Commission (PenCom), the agency, which regulates the sector in the country.
Addressing newsmen on Thursday in Lagos, the Director-General of PenCom, Ms Omolola Oloworaran, explained that the shift in deadline was to give operators more time to boost the capital base, dismissing speculations that the exercise had been suspended.
“The recapitalisation has not been suspended. We have communicated the requirements to the Pension Fund Administrators (PFAs), and we expect every operator to be compliant by June 2027. Anyone who is not compliant by then will lose their licence,” Ms Oloworaran told journalists.
She added that, “From a regulatory standpoint, our major challenge is ensuring compliance. We are working with ICPC, labour and the TUC to ensure employers remit pension contributions for their employees.”
The DG noted that engagements with industry operators indicated broad acceptance of the policy, with many PFAs already taking steps to raise additional capital or explore mergers and acquisitions.
“You may see some mergers and acquisitions in the industry, but what is clear is that the recapitalisation exercise is on track and the industry agrees with us,” she stated.
PenCom wants the PFAs to increase their capital base and has created three categories, with the first consists operators with Assets Under Management of N500 billion and above. They are expected to have a minimum capital of N20 billion and one per cent of AUM above N500 billion.
The second category has PFAs with AUM below N500 billion, which must have at least N20 billion as capital base.
The last segment comprises special-purpose PFAs such as NPF Pensions Limited, whose minimum capital was pegged at N30 billion, and the Nigerian University Pension Management Company Limited, whose minimum capital was fixed at N20 billion.
By Adedapo Adesanya
Three securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Thursday, December 18.
According to data, Central Securities Clearing System (CSCS) Plc led the losers’ group after it slipped by N2.87 to N36.78 per share from N39.65 per share, Golden Capital Plc depreciated by 77 Kobo to end at N6.98 per unit versus the previous day’s N7.77 per unit, and FrieslandCampina Wamco Nigeria Plc dropped 19 Kobo to sell at N60.00 per share versus Wednesday’s closing price of N60.19 per share.
At the close of business, the market capitalisation lost N16.81 billion to finish at N2.147 billion compared with the preceding session’s N2.164 trillion, and the NASD Unlisted Security Index (NSI) declined by 24.76 points to 3,589.88 points from 3,614.64 points.
Yesterday, the volume of securities bought and sold increased by 49.3 per cent to 30.5 million units from 20.4 million units, the value of securities surged by 211.8 per cent to N225.1 million from N72.2 million, and the number of deals jumped by 33.3 per cent to 28 deals from 21 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc remained the most traded stock by value with a year-to-date sale of 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
Similarly, InfraCredit Plc ended as the most traded stock by volume on a year-to-date basis with 5.8 billion units traded for N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units exchanged for N524.9 million.
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