Economy
It’d be Shameful for Nigeria to Witness Another Recession—Reps
By Modupe Gbadeyanka
The House of Representatives has said it would be a shame for Nigeria to record another economic recession in four years.
In the second quarter of 2016, just over a year into the administration of President Muhammadu Buhari, the nation slipped into an economic crisis.
The major driver of this was the incessant attacks on oil installations in the Niger Delta region of Nigeria, which significantly reduced the volume of crude produced by the country.
It took the intervention of the Vice President, Mr Yemi Osinbajo, who held talks with leaders of the region, to bring things back to normal and a year later, Nigeria was out of recession.
In the second quarter of 2020, the National Bureau of Statistics (NBS) said the country’s Gross Domestic Product (GDP), which measures economic activities, declined by 6.1 per cent.
One of the major reasons for the loss was due to the COVID-19 pandemic, which forced the government to shut down the economy. In addition, the decline in the price of crude oil at the international market contributed to the economic crisis, which reduced earnings of the government.
It is already being projected that Nigeria will suffer another decline in GDP and then drag the nation into the second recession under the administration of Mr Buhari.
On Thursday, the Securities and Exchange Commission (SEC) was before the House Committee on Capital Market to defend their budget estimate for the 2021 fiscal year.
During the event, Chairman of the committee, Mr Babangida Ibrahim, stated that more efforts must be put in place to ensure financial projections are realised because according to him, “it would be a shame for the nation to go back to recession.”
While calling for a realistic budget that can be achieved on behalf of Nigerians, the lawmaker assured SEC that the committee was committed to ensuring that it succeeds and that depending on the economic realities of the year 2021, SEC could come back to the committee for an upward review of its estimates if the year turns out more favourable, business-wise.
The committee also called for better government policies to boost market confidence and participation.
In a presentation, the Director-General of SEC, Mr Lamido Yuguda, admitted that the COVID-19 pandemic adversely affected its efforts under the 2020 appropriation as its revenue was directly generated from market participation, not from government coffers.
He said as a direct result of the pandemic, markets had to shut down, a development that caused huge revenue losses for many months.
Mr Yuguda told the committee that as of November 2020, the commission’s 2020 budget revenue achievements stood at 70 per cent of its projection, while securities registration is at 84 per cent achievement for the same period.
He said the 2021 budget proposal was drafted under difficult conditions as a result of the lockdown, which caused serious operational revenue and manpower shortfall.
The DG revealed that SEC has been running on a deficit as a result of the capital market meltdown of 2008/2009 as many companies lost confidence in the capital market. The market had been steadily reviving before the COVID-19 pandemic dealt a huge blow to it, he added.
SEC, he said, has not been able to recruit staff for a long time due to these financial shortfalls and that it is looking for other ways of generating revenue such as the regulation of digital trading, international collaborations, commodities exchanges and the strengthening of its training institute to be of international standard to generate funds, especially continentally.
By Adedapo Adesanya
The Naira opened the new trading week on a negative note on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEX) and the black market.
At the parallel market, the Nigerian currency weakened against the US Dollar by N5 to sell for N1,380/$1 compared with the preceding session’s rate of N1,375/$1, and at the GTBank FX desk, it shed N1 to trade at N1,373/$1 versus N1,372/$1.
At the official market, it lost 63 Kobo or 0.05 per cent against the Dollar during the session to close at N1,362.84/$1, in contrast to last Friday’s value of N1,362.21/$1.
However, the Nigerian Naira gained N2.30 against the Pound Sterling at the spot market yesterday, quoting at N1,821.29/£1 compared with the previous rate of N1,823.59/£1, and improved against the Euro by 23 Kobo to settle at N1,574.35/€1 versus N1,574.58/€1.
Data from the Central Bank of Nigeria (CBN) showed that interbank forex turnover increased to $92.248 million across 90 deals, from $73.565 million last Friday.
On the policy front, participants believed that the application of the fourth edition of the Foreign Exchange Manual of the central bank, which introduces updated guidelines for foreign exchange transactions and tightening compliance requirements for authorised dealers and market participants, will enhance market flexibility and ease previous restrictions.
Meanwhile, the cryptocurrency market snapped from recent declines, jolted by Strategy’s purchase of 1,550 Bitcoin for approximately $101 million, increasing its total holdings to 845,256 BTC. The company raised $181 million through common stock sales, using the proceeds to fund the bitcoin purchase and increase its cash reserves to $1 billion, pushing the price of the coin higher by 3.2 per cent to $63,731.69.
Cardano (ADA) appreciated by 8.4 per cent to $0.1738, Ethereum (ETH) rose by 5.2 per cent to $1,711.54, Solana (SOL) expanded by 5.1 per cent to $67.82, and Ripple (XRP) improved by 4.9 per cent to $1.18.
Further, Dogecoin (DOGE) jumped by 4.3 per cent to $0.0873, Binance Coin (BNB) soared by 2.7 per cent to $609.50, and TRON (TRX) increased by 0.7 per cent to $0.3274, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $0.9997 and $0.9998, respectively.
By Aduragbemi Omiyale
The federal government has been advised to consider exploring other funding sources to finance its budget deficits.
Speaking with Punch recently, the chief executive of CSA Advisory, Mr Aliyu Ilias, said the current appetite for borrowing by the government cannot be sustained because it elevates debt-servicing costs.
The economist suggested the sale of some public assets and the involvement of the private sector in infrastructure financing for economic growth.
According to him, running to the debt markets to raise funds for the government is not the best route to take, as the reliance on borrowing always leads to higher debt-servicing obligations.
“The more you borrow, the more you are also incurring more debt services,” he said, tasking the government to also capitalise on increased oil revenues stemming from ongoing geopolitical tensions in the Middle East.
“The government can actually sell off some of their assets to raise more money. The government can also, if you look at the revenue we are getting from oil, it’s getting more, especially with this war. It’s another opportunity for us to actually not borrow again,” Mr Ilias submitted.
He also pointed to ongoing tax reforms as another avenue to improve government finances and narrow the fiscal gap.
“The government can also look at tax reform. The fact is that the government does not have money. The only chance for getting more money is to address the financial deficit,” he added.
By Adedapo Adesanya
Crude oil was up by $1 on Monday as Iran and Israel said they had halted attacks on each other following an appeal from US President Donald Trump.
Brent crude futures gained $1.16 or 1.3 per cent to trade at $94.25 a barrel, while the US West Texas Intermediate (WTI) crude futures were up 76 cents or 0.8 per cent to $91.30 per barrel.
Iran’s military said Monday it halted attacks on Israel after the two countries exchanged their most intense strikes in months, further straining an already shaky ceasefire as well as the US-Israeli relationship. Iran, however, said it would resume strikes if Israel continued to hit Hezbollah in Lebanon.
Israel also halted attacks on Iran, Israeli Prime Minister Benjamin Netanyahu said, stopping short of acknowledging a ceasefire that US President Donald Trump said the countries were aiming for.
President Trump said earlier that the US blockade, which was introduced in April, would remain in place “in full force” until a final peace agreement between the two warring nations is reached.
Prices gained more than 5 per cent earlier on Monday after renewed Israeli strikes on Iran and attacks on Lebanon had reduced hopes of an imminent end to the wider war.
Market analysts noted that because of the strikes, investors were concerned that flows through the Strait of Hormuz might remain restricted for longer. Roughly a fifth of the world’s daily supply of oil and liquefied natural gas passed through the waterway before US-Israeli airstrikes at the end of February unleashed the latest escalation of the Middle Eastern conflict.
Yemen’s Iran-aligned Houthis said on Monday they would ban ships linked to Israel from the Red Sea after Israel renewed its military attacks on Iran, adding to concerns about global shipping and energy flows.
In the face of the supply crisis, a sub-group under the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday agreed on its fourth oil output target increase in four months. The seven members decided to increase targets by 188,000 barrels per day from July, the same as the June hike, which was adjusted down from monthly increases of 206,000 barrels per day in May and April to take into account the exit of the United Arab Emirates (UAE).
On paper, the sub-group has increased its output quotas from April to June by almost 600,000 barrels per day, but in reality, the group’s production has collapsed due to export cuts by Gulf members, averaging 33.19 million barrels per day in April compared with 42.77 million barrels per day in February.
Saudi Arabia has cut its official selling prices for crude oil to Asia in July for a second month.
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