Buhari 3.0 Options, Choices & Actions Presented by Bismarck Rewane CEO, Financial Derivatives Company Ltd. May 28 th , 2019
Ma Macro croeco economic nomic Sco Scorec recard ard 2021 21 2019 19 2014/ / 2014 14 Economic Indicators 2019 568.5 576.5 482.3 GDP ($’bn) 6.22 3.4 1.91 GDP growth rate (%) 65 Oil Price($’pb) 99.26 66.51 1.77 Oil Production(mbpd) 1.75 1.91 4,016 4,200 On Grid Power (MW/h) 3,790 54 45.09 External Reserves($’bn) 34.47 9.71 31.2 25.27 External Debt($’bn) 19.08 24.76 22.8 External buffers ($’bn) 400 191 361 Exchange Rate N/$ 2
Macro Ma croeco economic nomic Sco Scorec recard ard 2021 21 2019 19 2014/ / 2014 14 Economic Indicators 2019 23.5 -6.4 29.6 Trade balance ($’bn) 11.37 9.60 9.2 Inflation rate (%) Unemployment + 29.1 35 43.2 Underemployment (%) Misery index 38.70 54.57 44.2 unemployment+underemployment+inflation 18,000 30,000 Minimum wage (N) 30,000 Income per capita ($) 2,400 2,726 2,726 3
Macro Ma croeco economic nomic Sco Scorec recard ard 2014 14 2019 19 201 014/201 4/2019 Social Indicators Ease of doing business (out of 190) 170 146 Ease of doing business score 47.33 52.89 Transparency Index (out of 180) 136 144 53.43 52.55 Life Expectancy (years) 19 indicators measured: 11 negative 8 positive 4 Source: NBS, CBN, DMO, EIU, FDC Think Tank
Citizens Scorecard – Suffering but Smiling Source: FDC Think Tank Commodities 2014 May’19 % Change (2015/2019) Average inflation (%) Garri 13,500 6,500 52 20 15.63 15 Rice (50kg) 9,500 15,000 59 12.15 11.31 10 8.06 Beans (50kg) 14,000 19,000 36 5 0 Gala 100 100 - 2014 2016 2018 2019 Palm Oil (25L) 9,000 9,000 - Source: NBS, FDC Think Tank Tomatoes (50kg) 4,300 18,000 319 Headline inflation now at PMS (N/ltr) 97 145 49 11.37% (April) Expected to increase in the coming months 5
Oil Price Drives Economy GDP Growth (%) % The Boom Period Recession Slowdown 7 Relapse or Slow Recovery 5.94 Takeoff?? 6.54 6 6.23 6.21 5 3.96 4 2.84 3 2.5 2.5 2.38 2.35 2.2 2.11 2.11 2.01 1.95 1.81 2 1.5 1.2 1 0.55 0 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 -1 -0.91 -0.67 -1.49 -2 -1.73 -2.34 -3 Source: NBS, FDC Think Tank 6
What the World Says - IMF Assess ssme ment nt Economy is recovering Persisting structural and policy challenges Huge infrastructure gap Governance and institutional weakness Recom ommen endat datio ions s Stop multiple exchange rates Improve tax collection Stop waivers exemptions Tighten money supply Outlook ok 8 Growth to hover around 2%-2.5%
What the World Says - EIU Assess ssme ment nt Business environment unlikely to improve Weak government institutions to persist Oil revenue likely to underperform Current account will record thinner surpluses Recom ommen endat datio ions s Increased government spending on priority areas Boost tax compliance and widen tax net Market-oriented reforms Outlook ok Economic performance will pick up moderately 9 Business reforms unlikely to be sufficient
Buha Bu hari ri 2.0: 0: Polic olicy y Tren rends ds & Inc & Incon onsiste sistencie ncies • 9 banks banned from forex trading • 9% Communication tax on end users Launched the Economic Increase in Excise duty on Recovery and Growth Plan alcohol & tobacco New minimum wage was (ERGP) signed (N30,000) Presidential Enabling Business Environment Council (PEBEC) Launched in 2017 Commencement of IEFX window was Anchor Borrowers introduced Programme 2018 2017 2015 2016 2019 10
GDP : Catalyst Needed = Investment Multiplier (2015)Y = C + I + G + X - M $388.0bn $73.2bn $29.3bn $493.8bn - (2019)Y = C + I + G + X - M $66.3bn $22.0bn $482.3bn $386.7bn $3.4bn (2023)Y = C + I + G + X - M $88.7bn $24.7bn $550bn $423.9bn $10bn 11
Buhari 3.0: New Agenda (Old Wine in Old Bottles?) The leopard must change its spots Challenges to address: Recessionary gap is 1% - Nigeria still at risk of another recession Sub-optimal investment level ($66.3bn – 2019) Vulnerability to exogenous shocks Depleting external buffers 12
The Must Do’s Sign the African Continental Free Trade Area (AfCFTA) Forex convertibility Reduce subsidies gradually Investment in road and rail transport Airport concessioning Block leakages Simplify tax administration 13
The May Do’s Unification of exchange rates to facilitate trade flows Lease/sale of idle assets Convert power sector loans to equity Shift subsidies from wasteful consumption to critical social infrastructure (health, education) 15
The Will Not Do’s Remove subsidies completely Sell refineries Restructure the forex market 16
Outlook – Muddle through or Take off?? President’s first official duty would be his cabinet choice Key appointments to be finalised in June Portfolio and personality changes but policy continuity Execution of policy and response to shocks will be the major challenge Inflationary pressures to persist (liquidity, cost push factors) Unemployment to increase to 25%-28% Likely VAT and excise duty adjustments 17 17
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