PIGB: A dollar short and an hour late??
After an extended delay of 12 years, the National Assembly (NASS) is now set to pass the Petroleum Industry Governance Bill (PIGB). This will provide clarity on the fiscal terms for investors. It will also end the abuse of discretionary powers by regulators and policy makers in the petroleum industry. Whilst the passage of the bill is expected to improve corporate governance and transparency, it is coming at a time of a global shift towards renewable energy. This could reduce its attractiveness to existing and potential investors in the upstream petroleum industry. The allocation of 2.5% of oil company turnover to the host communities will be another source of acrimony and tribal feuds in the Niger Delta.
Global economy to expand by 5.6% in 2021
It was a pleasant surprise to see the World Bank (IBRD) revise upwards its global and Nigerian growth forecasts. This is because the World Bank, amongst the Washington consensus (World Bank, IFC and IMF) is considered very stingy with its forecasts. Global growth forecast was revised upwards by 1.5% to 5.6% while Nigeria’s growth projection was increased to 1.8% from 1.1%. At a time that Nigeria is planning to raise money from the international capital markets, an upward revision in GDP growth forecast will be considered investor positive. An endorsement by the IMF and World Bank will go a long way in reducing the risk profile and pricing of the Nigerian Eurobond issue.
Trade deficit widens ($9.61bn) as Naira falls (N502/$)
Nigeria’s trade deficit widened from $804.6mn (Q1’20) to $9.61bn (Q1’21), which means Nigeria imported more and exported less. In addition, the price of Nigerian exports declined relative to imports. All these mean a weaker external sector and more pressure on the Naira. So far in June, the currency has been trading at over N500/$ at the parallel market due to increased speculative trading.
In this edition of the FDC bi-monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
Enjoy your read!