As Nigeria is projected to raise $3 billion this year meet its
infrastructure needs, which is expected to increase its public
debts, the situation will force the country’s policy makers to
implement structural reforms, the Chief Executive Officer,
Financial Derivatives Company (FDC), Mr. Bismarck Rewane has
stated.
![image](/2020/10/lawreport.jpg")
He stated this in his latest Lagos Business School’s executive
breakfast meeting presentation, a copy of which was obtained at the
weekend.
![image](/2021/01/payne-alex.jpg")
The April 2021 edition of the monthly report, entitled “Oil
Illusion and Financial Delusion,” was a review of the economic
performance of the country in the just ended first quarter of 2021
and a peep into the second quarter performance.
He said the depth of recession experienced in 2020, would leave
a large fiscal and debt hangover for most African countries and
would reduce the scope for policy makers to respond with
stimulatory measures, citing Zambia as the first country in the
region to default in its Eurobond repayment.
The report notedd that several African countries, including
Nigeria, Kenya and South Africa were planning to borrow from the
international capital markets. Ghana recently successfully issued
$3 billion Eurobond.
“Nigeria will raise $3 billion in 2021. Increased borrowing to
meet infrastructure need will force Nigerian policy makers to
implement structural reforms,” Rewane wrote in the report.
For Sub-Saharan Africa (SSA), the FDC CEO said pro-business
policies and structural reforms would help bolster economic
activity over the longer term, stressing that policy initiatives to
address lagging productivity, skills and infrastructure would
progress slowly.
On the kind of recovery expected in SSA, he forecasted an
inverted V-shaped recovery, noting that recoveries were diverging
across and within countries.
He projected that SSA economy would expand by 3.4 per cent in
2021 and four per cent in 2022, while Inverted V-shaped recovery
was expected to occur in Nigeria and South Africa.
However, the FDC boss said the informal sector was going to spur
the projected recovery, predicting that unemployment in the formal
economy would decline slowly.
He added that while jobs in the informal sector will rebound
faster as restrictions eased, inflation was projected to average
8.1 per cent in 2021, before edging down to eight per cent in
2022.
“From our perspective, we can say that Nigeria will experience
an inverted V-shaped recovery while battling persistent
inflation.
“Institutional and domestic investors are jittery as they
attempt to make sense of ambiguous pronouncements and conflicting
data,” he stated in the report.
Noting that the International Monetary Fund (IMF) and World
Bank, at their spring meetings in Washington, expressed optimism
about Nigeria’s economic recovery, he argued that the upward review
of their projections on the West African country, rests heavily on
optimal vaccine rollouts and stronger oil prices.
The IMF last week revised its 2021 Gross Domestic Product (GDP)
growth projection for Nigeria to 2.5 per cent from one per cent,
this, Rewane said was “a confidence boost for the much needed
investment inflows.”
He warned, however, that the snares of insecurity, hyperinflation
and policy uncertainty in the country could force investors to take
their funds elsewhere.
On exchange rate policy, the FDC boss argued that the nuanced
interpretation of flexible or floating exchange rates by policy
makers, made investors wary and was seen as a missed opportunity to
embark on a unified exchange rate system.
He added that exchange rate convergence remains the sole
objective of the Central Bank of Nigeria (CBN).
He, however, said the forex rationing has continued and that the
I&E window was still controlled, pointing out that limited
forex supply has forced manufacturers to source over 90 per cent of
forex from the parallel market.
FDC stated that forex intervention in the I&E window fell
throughout March to an average of $66.63 million, indicating a
preference for reserves accretion at the expense of exchange rate
alignment, adding “So it is neither a yay nor nay situation…we take
it as it is and hope for the best”.
“In all of this, the Nigerian consumer remains financially
embattled. Disposable income is flat but discretionary income is
sharply lower due to rising food prices, transport costs and
electricity bills. Many state governments owe salary arrears and
labour is on a warpath.”
As Nigeria is projected to raise $3 billion this year meet its
infrastructure needs, which is expected to increase its public
debts, the situation will force the country’s policy makers to
implement structural reforms, the Chief Executive Officer,
Financial Derivatives Company (FDC), Mr. Bismarck Rewane has
stated.
He stated this in his latest Lagos Business School’s executive
breakfast meeting presentation, a copy of which was obtained at the
weekend.
The April 2021 edition of the monthly report, entitled “Oil
Illusion and Financial Delusion,” was a review of the economic
performance of the country in the just ended first quarter of 2021
and a peep into the second quarter performance.
He said the depth of recession experienced in 2020, would leave
a large fiscal and debt hangover for most African countries and
would reduce the scope for policy makers to respond with
stimulatory measures, citing Zambia as the first country in the
region to default in its Eurobond repayment.
The report notedd that several African countries, including
Nigeria, Kenya and South Africa were planning to borrow from the
international capital markets. Ghana recently successfully issued
$3 billion Eurobond.
“Nigeria will raise $3 billion in 2021. Increased borrowing to
meet infrastructure need will force Nigerian policy makers to
implement structural reforms,” Rewane wrote in the report.
For Sub-Saharan Africa (SSA), the FDC CEO said pro-business
policies and structural reforms would help bolster economic
activity over the longer term, stressing that policy initiatives to
address lagging productivity, skills and infrastructure would
progress slowly.
On the kind of recovery expected in SSA, he forecasted an
inverted V-shaped recovery, noting that recoveries were diverging
across and within countries.
He projected that SSA economy would expand by 3.4 per cent in
2021 and four per cent in 2022, while Inverted V-shaped recovery
was expected to occur in Nigeria and South Africa.
However, the FDC boss said the informal sector was going to spur
the projected recovery, predicting that unemployment in the formal
economy would decline slowly.
He added that while jobs in the informal sector will rebound
faster as restrictions eased, inflation was projected to average
8.1 per cent in 2021, before edging down to eight per cent in
2022.
“From our perspective, we can say that Nigeria will experience
an inverted V-shaped recovery while battling persistent
inflation.
“Institutional and domestic investors are jittery as they
attempt to make sense of ambiguous pronouncements and conflicting
data,” he stated in the report.
Noting that the International Monetary Fund (IMF) and World
Bank, at their spring meetings in Washington, expressed optimism
about Nigeria’s economic recovery, he argued that the upward review
of their projections on the West African country, rests heavily on
optimal vaccine rollouts and stronger oil prices.
The IMF last week revised its 2021 Gross Domestic Product (GDP)
growth projection for Nigeria to 2.5 per cent from one per cent,
this, Rewane said was “a confidence boost for the much needed
investment inflows.”
He warned, however, that the snares of insecurity, hyperinflation
and policy uncertainty in the country could force investors to take
their funds elsewhere.
On exchange rate policy, the FDC boss argued that the nuanced
interpretation of flexible or floating exchange rates by policy
makers, made investors wary and was seen as a missed opportunity to
embark on a unified exchange rate system.
He added that exchange rate convergence remains the sole
objective of the Central Bank of Nigeria (CBN).
He, however, said the forex rationing has continued and that the
I&E window was still controlled, pointing out that limited
forex supply has forced manufacturers to source over 90 per cent of
forex from the parallel market.
FDC stated that forex intervention in the I&E window fell
throughout March to an average of $66.63 million, indicating a
preference for reserves accretion at the expense of exchange rate
alignment, adding “So it is neither a yay nor nay situation…we take
it as it is and hope for the best”.
“In all of this, the Nigerian consumer remains financially
embattled. Disposable income is flat but discretionary income is
sharply lower due to rising food prices, transport costs and
electricity bills. Many state governments owe salary arrears and
labour is on a warpath.”