The Doyin Salami-led Economic Advisory Council appointed by President Muhammadu Buhari has told the Central Bank it will not be appropriate to participate in the economic growth conference which the apex bank is staging in Abuja today. In a letter delivered on Monday, the council said since today’s conference will be discussing virtually the same issues upon which it (council) has deliberated and forwarded its views to government, there would be no good served for any of its members to participate. Businessday quoted some business leaders as saying that the advisory council’s rejection of the invitation to the conference a fallout and clear indication of the policy divergence between the Central Bank and the council on key issues. The council’s decision to stay away from the CBN-orchestrated conference was sent ahead of yesterday’s letter by frontline banker Atedo Peterside who has also announced that he will be staying away from the conference. The advisory council held its meeting in Abuja on Friday and Saturday as the global market meltdown gathered steam.
Nigeria’s ‘record’ 2020 budget will be revised downwards, according to the Ministry of Finance, due to the sharp drop in the price of crude oil. World oil demand is expected to contract this year for the first time in more than a decade, as the coronavirus epidemic is causing a blockage in economic activity, the International Energy Agency disclosed on Monday. Oil prices plummeted around 30% with U.S. oil heading for its biggest loss on record after Saudi Arabia slashed prices and set plans for a dramatic increase in crude production in April. Prices fell dramatically following Saudi Arabia’s move to start a price war after Russia baulked at making the further steep output cuts proposed by OPEC to stabilise oil markets hit by worries over the global spread of the coronavirus. The benchmark Brent Crude hit $13.29, or 29%, at $31.98 a barrel on Monday morning, after earlier dropping to $31.02, their lowest since February 2016. Saudi Arabia plans to boost its crude output above 10 million barrels per day in April after the current deal to curb production expires at the end of this month.
Data from the National Bureau of Statistics has shown that Nigeria recorded its first quarterly trade deficit since July 2016 as the value of the country’s exports fell by 9.79% in the fourth quarter of 2019. Imports increased by 37.20%. The value of Nigeria’s total trade, according to the NBS’ Foreign Trade in Goods Statistics report, rose by 10.15% to ₦10.12 trillion in Q4 2019 over the value recorded in Q3. The value of the export component dropped by 9.79% to ₦4.77 trillion in Q4 compared to Q3, while the import component increased by 37.20 trillion to ₦5.35 trillion. The report said the value of total trade in 2019 rose by 14.05% to ₦36.15 trillion compared to the previous year as the faster increase in imports resulted in a negative trade balance of ₦579.06 billion during the Q4, first since mid-2016. The value of total trade rose by 36.86% year-on-year in 2018. Total imports stood at ₦5.34 trillion in Q4’19, representing an increase of 37.2% over the value recorded in Q3’19 and 49.34% over the corresponding quarter of 2018. The value of imported agricultural goods decreased by 2.8% in Q4’19, compared to Q3. It, however, rose by 6.6%, compared to the corresponding quarter in 2018 as the value of agricultural imports in 2019 was 12.7% higher than in 2018. Imports of raw materials, among others, was said to have grown 19.2% in 2019, compared to 2018. The value of energy goods imports decreased by 65.27% in Q4’19, compared to Q3’19 and by 75.86%, compared to Q4 2018.
Sudan’s Prime Minister Abdalla Hamdok has survived an assassination attempt in the capital, Khartoum, according to state media. “An explosion hit as Prime Minister Abdalla Hamdok’s car was driving by but thank God no one was hurt,” Ali Bakhit, the prime minister’s office director, said on Monday. There was no immediate claim of responsibility. Footage posted online showed two white vehicles used by Sudan’s top officials parked on a street, damaged with their windows broken. Another vehicle was badly damaged in the blast. The convoy appeared to have been targeted from above, the witnesses said. Mr Hamdok is a respected former UN economist and says one of his main priorities is to solve Sudan’s economic crisis. He was appointed by Sudan’s Sovereign Council, made up of six civilians and five military officers, to lead a three-year transition to civilian rule after Mr Bashir was ousted.
- An already faltering Nigerian economy has come under intense pressure this week following the collapse in oil prices. This is because the government has dithered for years to push through the bold economic reforms that Nigeria needs. The government already experienced a steep decline in revenues in 2019 and the trend is likely to continue in 2020. In addition, the oil price collapse has now quickly turned into a severe foreign currency crisis for Nigeria where panic buying of the dollar became very pronounced by Wednesday with local banks quoting the greenback at ₦390 for offshore trade, a scarcity of dollars leading to some outlets selling at up to ₦407, and both the Economic and Financial Crimes Commission (EFCC) and the CBN defaulting back to bad habits in trying to “defend the naira”. A planned Eurobond issue by Nigeria now looks increasingly unlikely at this time because of the higher costs investors will foist on the government. A leading US bank says although the bond offer is still possible, Nigeria may have to pay as much as 3% more to lure wary investors now increasingly focused on the damning commentary of the latest Standard & Poors report on the Nigerian economy. At this critical time, policy officials need the counsel of the likes of the Doyin Salami and the rest of the Economic Advisory Council now more than ever. This is not the time to allow the country’s infamously petty politics to get in the way of sound economic planning.
- The disintegration of the grouping called OPEC+, made up of OPEC plus other producers including Russia, ends more than three years of cooperation on supporting the market with all parties, especially Russia and Saudi Arabia, now competing in a price war which has led oil prices to plummet in just a few days. Nigeria’s 2020 budget proposal was prepared with $53 as the crude oil budget benchmark but was approved with $57 benchmark and oil production benchmark of 2.18 million barrels per day. Nigeria, therefore, is bound to suffer on two fronts – oil prices and oil production. As at Thursday, 12 March 2020, the oil benchmark Brent Crude was priced at $34.75/barrel whilst the Nigeria National Petroleum Corporation has revealed just last week that oil traders are struggling to find buyers for 55 Nigerian crude oil cargoes, with most of Nigeria’s April crude oil export programme remaining unsold. While in our 2020 forecast we had predicted that the 2020 budget would fail, our expectations were not this harsh. Without a significant intervention in the budget’s structure, aims and objectives, it will be doomed. The first lesson from this early-stage budget crisis is that the oil benchmark mechanism, so faithfully adhered to by many a Nigerian administration, is now in its death throes.
- This report of negative trade balance is not good news for several reasons. Firstly, a look back at 2016, the last time this occurred, shows that between Q1 and Q3 2016, not only did the country experience three straight quarters of negative trade balance, the economy also fell into a recession. Secondly, Nigeria’s borders have been closed since Q3 2019 so a rise in imports the following quarter is surprising (imported agricultural goods decreased by only 2.8% showing that the policy is failing to meet one of its key objectives). At the same time, exports declined as the country has struggled to sell its crude for the past year (and this has become worse following the coronavirus outbreak). A look at the capital importation numbers paint a gloomier picture as the total value of capital importation into Nigeria in Q3 2019 declined by 32.42% q/q to $3,802.38 million. Little surprise that the country’s foreign reserves have been on a steep decline in recent months and soon the CBN will have little option but to devalue the naira.
- Although it has been almost a year since the ouster of Omar al-Bashir from office, there are still power struggles in the country, chiefly between the military class and the revolutionary movement, which is keen to ensure that the gains of forcing al-Bashir from power aren’t eroded. No suspects have been named in the attack, but we think that it will increase the political instability in a country that is desperate to emerge from its pariah status and be reintegrated into the global community. It bears noting that besides the internal power struggles, there is also jockeying for influence in the country between Turkey and Qatar on the one hand, and Egypt, Saudi Arabia and the United Arab Emirates on the other hand. This will factor into the calculus for the direction Sudan will take going forward, with no really good outcomes.