Economy
Isolated Trading Blocs Could Trigger 4% GDP Decline for Sub-Saharan Africa—IMF
By Adedapo Adesanya
The International Monetary Fund (IMF) has warned that Sub-Saharan Africa, which includes Nigeria, could stand to lose the most if the world were split into two isolated trading blocs centred around China or the United States and the European Union (EU).
Sub-Saharan Africa refers to countries of the African continent that are not considered part of North Africa.
According to estimates released on Monday, sub-Saharan African economies could experience a permanent decline of up to 4 per cent of the real gross domestic product after 10 years, which is larger than what many countries experienced during the Global Financial Crisis of 2008-09.
It noted that economic and trade alliances with new economic partners, predominantly China, have benefited the region but have also made countries reliant on imports of food and energy more susceptible to global shocks, including disruptions from the surge in trade restrictions following Russia’s invasion of Ukraine.
“If geopolitical tensions were to escalate, countries could be hit by higher import prices or even lose access to key export markets—about half of the region’s value of international trade could be impacted,” the IMF said.
The lender warned that losses could be compounded if capital flows between trade blocs were cut off due to geopolitical tensions.
“The region could lose an estimated $10 billion of foreign direct investment (FDI) and official development assistance inflows, which is about half a per cent of GDP a year (based on an average 2017–19 estimate). The reduction in FDI, in the long run, could also hinder much-needed technology transfer.”
The IMF noted that the countries looking to restructure their debt, deepening geoeconomic fragmentation could also worsen coordination problems among creditors.
It advocated the need for strategic decoupling, saying the region would fare better if only the US/EU cut ties with Russia and sub-Saharan African countries continued to trade freely.
In this scenario, trade flows would be diverted towards the rest of the world, creating opportunities for new partnerships and possibly boosting intra-regional trade.
This is “because some African countries benefit from access to new export markets and cheaper imports, the region as a whole would not incur a GDP loss. Oil exporters supplying energy to Europe could even gain.”
To better manage shocks, IMF advised that countries need to build resilience. “This can be done by strengthening the ongoing regional trade integration under the African Continental Free Trade Area, which will require reducing tariff and non-tariff trade barriers, strengthening efficiency in customs, leveraging digitalization, and closing the infrastructure gaps.
“Deepening domestic financial markets can also broaden sources of financing and lower the volatility associated with relying too much on foreign inflows,” the IMF noted.
It also noted that to take advantage of the potential shifts in trade and FDI flows, countries in the region can try to identify and nurture sectors that may benefit from trade diversion, “for example, energy. Commodity exporters in the region could potentially displace much of Russia’s energy market share in Europe.”
“Countries can also rely on trade promotion agencies to help identify potential opportunities, build the necessary skills and capacity for exports, and eventually re-orient production to take advantage of new trade flows. Improving the business environment, such as by lowering entry, regulatory, and tax barriers, could also help.”
The lender also said multilateral institutions would need to continue to facilitate dialogue among nations to promote economic integration and cooperation.
By Adedapo Adesanya
Crude oil went down on Tuesday after a projection showed steady demand in the world’s largest oil producer, the United States, for 2025, Brent futures declining by $1.09 or 1.35 per cent to settle at $79.92 a barrel and the US West Texas Intermediate (WTI) crude losing $1.32 or 1.67 per cent to finish at $77.50 a barrel.
On Tuesday, the US Energy Information Administration said the country’s oil demand would remain steady at 20.5 million barrels per day in 2025 and 2026, with domestic oil output rising to 13.55 million barrels per day, an increase from the agency’s previous forecast of 13.52 million barrels per day for this year.
Also, the oil market shrank a few days after prices gained following new US sanctions on Russian oil exports to India and China.
On Monday, prices jumped 2 per cent after the US Treasury Department on Friday imposed sanctions on Gazprom Neft and Surgutneftegas as well as 183 vessels that transport oil as part of Russia’s so-called shadow fleet of tankers.
Analysts say this move could have a significant price impact on Russian oil supplies from the fresh sanctions, however, their effect on the physical market could be less pronounced than what the affected volumes might suggest.
ING analysts estimated the new sanctions had the potential to erase the entire 700,000 barrels per day surplus they had forecast for this year, but said the real impact could be lower.
Uncertainty about demand from China, the world’s largest oil importer, could impact tighter supply this year.
China’s crude oil imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, official data showed on Monday.
Meanwhile, the American Petroleum Institute (API) estimated that crude oil inventories in the US fell by 2.6 million barrels for the week ending January 10.
For the week prior, the API reported a draw of 4.022 million barrels in US crude oil inventories amid build season, while product inventories saw a hefty build.
In 2024, crude oil inventories dropped by more than 12 million barrels, according to the API’s inventory data. In the first few weeks of 2025, crude inventories have shed more than 6.6 million barrels.
Official data from the US EIA will be due later on Wednesday, confirming the actual level of stockpiles.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited came under heavy selling pressure on Tuesday, going down by 1.66 per cent as investors embarked on profit-taking after most stocks on the trading platform gained in the past few trading sessions.
It was observed that the industrial goods sector was the most affected yesterday as it went down by 4.99 per cent due to the decline suffered by Dangote Cement and others.
The insurance continued its downward trend during the day as it lost 2.80 per cent, the consumer goods counter fell by 0.27 per cent, and the banking index shed 0.10 per cent, while the energy sector appreciated by 0.29 per cent.
At the close of business, the All-Share Index (ASI) deflated by 1,745.16 points to settle at 103,622.09 points compared with the previous trading day’s 105,367.25 points and the market capitalisation moderated by N1.1 trillion to finish at N63.188 trillion versus Monday’s N64.252 trillion.
Business Post reports that investor sentiment remained weak on Tuesday after the bourse ended with 41 depreciating equities and 23 appreciating equities, representing a negative market breadth index.
Honeywell Flour lost 10.00 per cent to trade at N9.54, Dangote Cement declined by 9.98 per cent to N431.00, Julius Berger crashed by 9.98 per cent to N139.80, Sovereign Trust Insurance decreased by 9.68 per cent to N1.12, and Prestige Assurance tumbled by 9.30 per cent to N1.17.
On the flip side, Northern Nigerian Flour Mills appreciated by 10.00 per cent to N45.10, Livestock Feeds grew by 9.91 per cent to N6.10, Academy Press expanded by 9.90 per cent to N3.22, University Press increased by 9.82 per cent to N4.81, and Neimeth gained 9.76 per cent to quote at N3.15.
During the session, market participants bought and sold 503.3 million shares valued at N12.6 billion in 12,900 deals compared with the 505.8 million shares worth N8.1 billion traded in 14,259 deals a day earlier, indicating a rise in the trading value by 55.56 per cent and a drop in the trading volume and number of deals by 0.49 per cent and 9.53 per cent, respectively.
The most active stock for the session was GTCO with 54.4 million units worth N3.2 billion, Nigerian Breweries transacted 32.2 million units for N1.0 billion, Universal Insurance traded 30.8 million units valued at N22.6 million, AIICO Insurance exchanged 26.6 million units worth N47.2 million, and Chams transacted 20.0 million units valued at N40.9 million.
By Adedapo Adesanya
The federal government is offering two new savings bonds with interest rates between 17 and 18 per cent through the Debt Management Office (DMO).
In a statement by the agency, the country said retail investors can purchase the two-year bond maturing in January 2027 at 17.23 per cent interest, while the three-year paper maturing in January 2028 at a coupon rate of 18.23 per cent.
Bonds are very safe financial instrument that serve as investments because they are backed by the federal government, which promises to pay back the money.
According to the DMO, people can buy these bonds starting January 13, 2025, until January 17, 2025, with allotment expected on January 22, 2025, and the interest to be paid to investors every three months – in April, July, October, and January.
These bonds have some special features. They are tax-free under both company and personal tax laws.
Big investors like pension funds and trustees are allowed to buy them and each bond costs N1,000 each.
However, interested investor can only buy at least N5,000 worth, and can’t buy more than N50 million.
This comes after the Ms Patience Oniha-led debt office said the Nigerian government was offering three bonds worth N150 billion in September 2024.
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