Economy
Nigeria’s 2018 Economic Outlook Remains Challenging—IMF
By Modupe Gbadeyanka
The International Monetary Fund (IMF) has warned that Nigeria’s economic outlook for 2018 still remains challenging.
The global lender made this observation at the end of its visit to the country this week.
From June 27 to July 9, 2018, an IMF staff team led by the Senior Resident Representative and Mission Chief for Nigeria, Mr Amine Mati, visited Nigeria, where they held “productive discussions with senior government and central bank officials.”
The team also met with representatives of the banking system, the private sector, civil society, and international development partners.
In a statement issued at the end of the visit, which was obtained by Business Post, the IMF said, “Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging.”
The global financial institution said Nigeria’s external reserves have remained stable at about $47 billion, supported by some convergence in existing foreign exchange windows, and despite some reversal of foreign inflows since April.
It noted that inflation declined to its lowest level in more than two years with real GDP expanding by 2 percent in the first quarter of 2018 compared with the first quarter of last year.
“However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending,” the bank stressed.
It pointed out that, “Corporate tax collection efforts improved but revenue shortfalls and the late adoption of the 2018 budget impede its implementation.
“Revenue from higher oil prices is limited by net losses from retail fuel sales while non-oil revenue remains below expectations, with yields from tax administration measures—including the Voluntary Asset Income Declaration Scheme (VAID) and increased tax audits—yet to fully materialize.
“Current spending remains in line with expectations. Carryover from 2017 to 2018 helped increase capital spending in the first four months of 2018, despite delayed approval of the 2018 budget.
“Lower yields have kept interest payments within the budgeted envelope, but the Federal Government’s interest-to-revenue ratio is expected to absorb more than half of revenues this year.”
“Reforms to improve the business environment are progressing, including through identification of priority investment projects and the adoption of the Company and Allied Matters Act (CAMA)—a legislative landmark for private sector development.
“The implementation of the Power Sector Recovery Plan is advancing through a mini-grid policy, and regulations on eligible customers and meter asset providers,” the IMF said in the statement.
It emphasised that, “Under current policies, the outlook remains challenging. Growth would pick up to about 2 percent in 2018, weighed down by lower than expected oil production and relatively weak agriculture growth. The fiscal deficit would narrow slightly, with higher oil revenues offsetting increased spending, including those planned in a supplementary budget.
“Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices.
“Increased oil exports would keep the current account in surplus, helping stabilize gross international reserves even if the current pace of foreign portfolio outflows continues.”
Furthermore, the IMF said, “A coherent set of policies to reduce vulnerabilities and increase growth remains urgent.
“This includes specific and sustainable measures to increase the currently low tax revenue—including through avoiding new tax exemptions — and ensuring budget targets are adhered to even in an election year.
“This process should be supported by keeping monetary policy tight through appropriate monetary policy tools that will help contain inflationary pressures and support a move towards a uniform market-determined exchange rate.
“Moving ahead with structural reforms is needed to invigorate inclusive growth, particularly in the power sector where faster progress would be needed to ensure financing shortfalls in the sector are met in a sustainable manner.”
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south for the fourth consecutive session after it shed 1.18 per cent on Friday, March 13.
The unlisted securities market recorded a loss despite closing without a price decliner, and ending with two price gainers led by Geo Fluids Plc, which gained 1o Kobo to sell at N3.10 per share compared with the previous day’s N3.00 per share. Industrial and General Insurance (IGI) Plc appreciated during the session by 2 Kobo to trade at 54 Kobo per unit versus Thursday’s closing price of 52 Kobo per unit.
When the market closed for the day, the market capitalisation lost N29.83 billion to close at N2.489 trillion compared with the N2.519 trillion it finished a day earlier, and the NASD Unlisted Security Index (NSI) crashed by 49.84 points to 4,160.46 points from 4,210.31 points.
Market activity improved yesterday, as the volume of transactions rose 179.5 per cent to 10.4 million units from 3.7 million units, but the value of trades declined by 68.4 per cent to N29.9 million from N95.0 million, while the number of deals weakened by 11.5 per cent to 46 deals from 52 deals.
Central Securities Clearing Systems (CSCS) Plc remained the most active stock by value on a year-to-date basis with 38.4 million units worth N2.4 billion, Okitipupa Plc followed with 6.4 million units traded at N1.1 billion, and FrieslandCampina Wamco Nigeria Plc transacted 6.3 million units for N584.3 million.
Resourcery Plc ended the trading session as the most traded stock by volume on a year-to-date basis with 1.1 billion units valued at N415.6 million, trailed by Geo-Fluids Plc with 130.8 million units valued at N504.5 million, and CSCS Plc with 38.4 million units worth N2.4 billion.
By Adedapo Adesanya
The Naira continued to claw back some gains against the Dollar in the different segments of the foreign exchange (FX) market, as its value was strengthened on Friday.
In the black market, it gained N10 against the United States Dollar yesterday to close at N1,400/$1 compared with the preceding day’s rate of N1,410/$1, and at the GTBank forex counter, it chalked up N6 to close at N1,385/$1, in contrast to the N1,391/$1 it was traded a day earlier.
Similarly, in the Nigerian Autonomous Foreign Exchange Market (NAFEX), it appreciated against the greenback during the session by N5.28 or 0.38 per cent to quote at N1,366.23/$1 versus Thursday’s closing price of N1,371.51/$1.
It also improved its value against the Pound Sterling in the official market on Friday by N21.81 to settle at N1,812.99/£1 compared with the previous day’s N1,834.80/£1, and gained N13.86 against the Euro to sell at N1,568.03/€1 versus N1,581.89/€1.
Pressure eased further on the FX market as the Central Bank of Nigeria (CBN) continued interventionist operations this week, selling Dollars to banks to boost liquidity after a $500 million boost last week.
This was complemented by inflows from foreign investors, exporters and non-bank corporates, among others, while Nigeria’s gross external reserves remained above $50 billion, the highest since 2009.
The Governor of the apex bank, Mr Yemi Cardoso, also eased fears of a Naira devaluation, saying the country’s financial system has been strengthened by reforms.
Regardless, external pressure looms as the US Dollar strengthened globally due to its war with Iran, now ongoing for three weeks.
Meanwhile, the cryptocurrency market was largely down as traders and investors continue to align with current realities.
The market is adapting to the conflict in real time. Early in the war, every headline produced an outsized reaction because nobody could price the tail risk. Now, traders have a framework where strikes happen, oil spikes and bitcoin dips only to recover again.
Cardano (ADA) depreciated by 3.8 per cent to $0.2623, Dogecoin (DOGE) lost 1.7 per cent to finish at $0.0948, Ripple (XRP) slumped 1.5 per cent to $1.39, Solana (SOL) dropped 1.4 per cent to sell for $87.33, Binance Coin (BNB) went down by 1.3 per cent to $653.58, Bitcoin (BTC) declined by 1.1 per cent to $70,670.63, and Ethereum (ETH) decreased by 0.9 per cent to $2,078.78.
However, TRON (TRX) appreciated by 1.7 per cent to $0.2941, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
By Adedapo Adesanya
The price of the major crude oil grade, Brent crude oil, closed above $100 on Friday for the second consecutive session, as the Iran war heads toward its third week, with oil tanker traffic through the Strait of Hormuz still effectively at a standstill.
It gained 2.67 per cent or $2.68 during the trading day to close at $103.14 per barrel, while the US West Texas Intermediate (WTI) crude oil grade appreciated by 3.11 per cent or $2.98 to settle at $98.71 per barrel.
Brent futures were up about 10 per cent for the week following the 27 per cent rise seen last week, which marked the biggest weekly gain in oil prices since the COVID-19 pandemic in 2020. WTI futures, which saw their best week since 1983 last week, ended the week more than 8 per cent higher.
US President Donald Trump said American forces launched a major bombing raid on Iran’s strategic Kharg Island, targeting military facilities on the key Persian Gulf outpost while warning Iran that its vital oil infrastructure could be destroyed if shipping in the Strait of Hormuz is disrupted.
The terminal accounts for roughly 90 per cent of Iranian crude shipments, loading millions of barrels per day onto tankers bound largely for Asian markets.
The US and Israel’s strikes in the conflict have largely targeted Iranian military and nuclear infrastructure. Oil facilities elsewhere in Iran have been hit, but Kharg’s massive storage tanks, jetties, and pipelines had remained untouched until the latest strike.
Iran’s new supreme leader, Mojtaba Khamenei, vowed to keep fighting in a message delivered via state television.
There have been a number of attacks on foreign ships in or near the Strait, feeding into concerns that a prolonged war could translate to a global economic shock.
Prices are rising despite the US and its allies rolling out some measures to keep a lid on energy costs.
The International Energy Agency (IEA) has agreed to release 400 million stockpiled barrels, the largest such action in history.
The US has issued a 30-day waiver for India to purchase sanctioned oil from Russia. President Donald Trump is considering loosening rules under the Jones Act that require American ships to transport goods between domestic ports, including oil and gas, in an effort to lower costs.
Traders are continuing to monitor developments in the Middle East.
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