Nigeria Economic Outlook 2020 and Covid-19 Responses Prof. Joseph Nnanna, Chief Economist Development Bank of Nigeria
Economic Outlook Nigeria GDP Nigeria Inflation Growth Rate Rate q The GDP in Nigeria has declined to -6.1% in Q2 2020 q Unemployment rose to 27.1 in Q2 2020 q Inflation has been on the rise since the outbreak of Covid-19. It rose to 13.71% in September q Prolonged weakness in the oil price has translated to further pressures on the exchange rate. q Devaluation of the Naira - Exchange Rate has depreciated between 380-400. q Businesses are facing difficulties in securing materials Nigeria Unemployment Rate leading to a sharp rise in purchase costs, with companies passing these on in the form of higher output prices. q Nigerians are being pushed into poverty as prices for goods are getting high.
Economic Outlook Nigeria Manufacturing PMI q The Manufacturing PMI for Nigeria fell to 46.9 in September of 2020 from 48.5 in August, pointing to a 5th straight month of contraction in factory activity. q The Non-Manufacturing PMI for Nigeria sector fell to 41.9 in September of 2020 from 44.7 in August, pointing to the 6th straight month of contraction in the non-manufacturing sector. Month Manufacturing PMI Non-Manufacturing PMI January 59.2 59.6 February 58.3 58.6 Nigeria Non-Manufacturing PMI March 51.1 49.2 April No Data Available May 42.2 25.3 June 41.1 35.7 July 44.9 43.3 August 48.5 44.7 September 46.9 41.9
The Nigerian Economy: LEIs Inflation Oil Production Rose to 13.71 in September Avg production fell to Unemployment from13.22% in August 1.81mbpd, Rose to 27.1 in Q2 of 2020 the highest on record up from 23.1% in Q3 2018 Capital Importation Oil price Declined 78.6% in Q2 2020 GDP Growth Rate Brent Crude increased to compared to Q2 2019 and - GDP grew by -6.10% $40.22pb as at September (Y-O-Y) in Q2 2020 77.9% compared to Q1 of 2020 2020 Exchange Rate Official exchange remained at 380/$ Interest Rates Parallel market depreciated to 455/$ as Treasury Bills yields fall to at September 2.8% as of September 2020 I&E rate remained at 386/$ as at September 8th, 2020 Positive Public Debt Negative External Reserves No Change Rose to N28.63 trillion as of Q1 2020 Declined to 35.88billion as of July 34.89% was external while 65.11% was domestic 2020 LEIs: Leading Economic Indicators Source: NBS, CBN
Main challenges faced by MSMEs q Low accessibility to loans from financial institution q Insufficient capital q Low power supply q Indiscriminate tax levies q Inability to keep proper financial record q Policy inconsistencies q Insecurity As a result of the pandemic, challenges faced by MSMEs have increased and this has led to lay-off of staff and shut down of businesses. Some of these businesses have diversified into making Covid-19 PPEs like face masks to take advantage of this need.
DBN Covid-19 Responses Aim Develop a clear Economic Sustainability Plan in response to challenges posed by the National Bureau of Statistics (NBS) COVID-19 Pandemic projects that economic growth could fall by as much as -4.40% to -8.91% A stimulus package of N2.3 trillion was Proposed Key Projects chosen. This amount will be funded by Problem N500bn from Special Accounts, N1.11 trillion • A Mass Agricultural Programme Economic consequences Nigeria is facing due of CBN structured lending and N302.9bn • Extensive Public Works and Road to the COVID-19 pandemic from other funding sources. Construction Programme • Oil revenue will drop from N669.9bn • Mass Housing Programme monthly to N88.4bn. • Strengthening the Social Safety Net • Unemployment rate which was 23.1% in • Support for Micro, Small & Medium 2018 is expected to rise to 33.6% in 2020 Enterprises The Federal Government, is set to commence nationwide implementation of two MSME initiatives namely; the MSME Survival Fund and the Payroll Support schemes, as the first to be rolled out (N60 billion) and then, the Guaranteed Offtake Scheme (N15billion). The Federal Government has disclosed that 174,574 persons have successfully registered for the N75bn MSME Survival fund and Guaranteed off-take stimulus schemes under the Nigeria Economic Sustainability Plan.
DBN Covid-19 Responses The Development Bank of Nigeria responded to the Covid-19 pandemic by providing: • Moratorium (Principal and Interest) on Loans to PFIs for up to 6 months • N100,000,000 million Grant to the Federal Government of Nigeria to cushion the health crises of the pandemic • Developed a long-term product (Long-term finance product) • Increased Capacity Building to more MSMEs
How Moroccan Economy and SMEs are facing the Covid-19 Crisis? Abdelmoughite Abdelmoumen, Head of Strategy Caisse Centrale de Garantie, Morocco
Economic Outlook • Morocco was severely hit by the effects of the Covid-19 crisis due to the drastic sanitary measures adopted in Morocco and overseas (general lockdown, suspension of international travel and flights…) • As Morocco is dependent on tourism, exports and FDIs for a considerable part of its economy and due to the fall of internal demand and to unfavourable weather conditions leading to a less than average agricultural output, the Moroccan economy suffered from the most difficult crisis since the 1990s: • GDP is expected to shrink by -5,8% in 2020 compared to a growth of 2,5% in 2019 • Budget deficit is expected to double in 2020 to reach -7,5% • Treasury debt is expected to reach 76% of the GDP compared to 65% in 2019
Economic Outlook • To overcome the crisis and to prepare for post-Covid relaunch, the Moroccan Government, the banking & insurance sectors and the central bank have adopted many emergency initiatives targeting the private sector and households (special guarantees, moratoriums, lower interest working capital loans, grants…) which have had a great effect. • Regarding the perspectives, the Moroccan Government is targeting a growth of about 5% and a deficit of 6,5% in 2021. to achieve these goals, the FY 2021 budget will be based on the following measures: ü Boosting the expenses linked to social security, healthcare and education ü Reduction of unnecessary public sector expenses ü Injecting more than 23 Billion USD in investments using a combination of PPP funds, credit loans and public sector investments ü Boosting entrepreneurship and SMEs by increasing guarantee and funding offerings
Main challenges faced by SMEs • Many advances have been achieved in boosting Moroccan SMEs, especially during recent years. Nevertheless, some major challenges are still preventing SMEs from fully ensuring their role as a growth engine: ü A high proportion of SMEs operate in the informal sector, especially micro and very small enterprises, which excludes them from tenders, credit, social security… ü The available funding offering, despite its wide scope, doesn’t perfectly address the needs of start-ups and less sophisticated micro enterprises ü Payment delays are still a major headache for SMEs, especially those relying on public tenders and big corporations ü SMEs are still less attractive for highly skilled workforce ü Some modern sustainable development practices (green economy, social responsibility, governance) are difficult to implement by SMEs
Economy of Japan and SMEs under COVID-19 Pandemic Hikaru Fukanuma, Chief Research Fellow Japan Finance Corporation Research Institute
Economic Outlook COVID-19: the First Wave = Mid April • Government announced the State of Emergency and asked people to quarantine. (April 16) • The State of Emergency was cancelled. (May 25) • GO TO TRAVEL campaign started (July 22) > subsidy for hotel stay COVID-19: the Second Wave = Mid August • GO TO EAT campaign started (October 1) > subsidy for payment at restaurants COVID-19 : pandemic is not so severe in Japan, currently • New infected persons = about 500 / day : about 90,000 in total • The number of deaths = less than 10 / day : about 1,600 in total
Economic Outlook • People stopped goin out (shopping, eating, sports, etc.) • Many companies started working remotely • Tourism and business trips stopped from / to abroad and within Japan • Sales of restaurants, retail shops, hotels, transportations decreased • Income of people in such industries decreased; some are laid off ⇒ 28.1% GDP decrease per year in 2Q 2020 compared of 1Q Government started a number of support measures for businesses and individuals • JFC has made special loans for about 800,000 SMEs (over 25% of SMEs in Japan) , as Government Finance Institution for SMEs. • The largest disaster recovery loan in JFC history: double of the one for the 2011 Earthquake.
Main challenges faced by SMEs • Some indicator shows recovering of business and consumer sentiment ⇒ 12.6% GDP increase per year 3Q compared of 2Q expected (by Japan Center for Economic Research) ⇒ Sales DI recovered to - 56.5 in Aug. from - 79.5 in April (by JFCRI Survey) Economy is certainly recovering but still not enough • Demand for SMEs and income of SMEs has not recovered yet • SMEs need to maintain jobs of employees and entrepreneurs themselves • SMEs cash demand has peaked out = new special loans by JFC decreased Uncertain future is the biggest problem • Will the 3rd wave come? • When will the economy, and the mood of the consumers, recover? • When will tourism, from overseas and within Japan, recover? We are hoping to host the Tokyo Olympics & Paralympics !
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