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OPEC+: Staying the course but looking over its shoulder

Fears of what could be a looming global recession have roiled markets and spooked investors. If this happens, it would be the 3rd global recession in the last 10 years. Loretta Mester, the President of the Federal Reserve Bank of Cleveland, has warned that the Omicron variant could put further pressure on supply chains and worsen worker shortages. The uncertainty surrounding the Omicron variant has sent the price of brent crude down 19% to $68.87pb – its lowest level in 15 weeks.

For Nigeria, it is a double-edged sword as lower oil prices would be negative for export revenues but would lead to a lower price of petrol. Conversely, if oil price rebounds, the government would be confronted by a higher fuel subsidy bill. OPEC+ chose to continue its current plan to increase oil production by 400,000bpd each month. But if oil price stays very low, OPEC+ might have to revisit this strategy.

Has it ever been a better time to be a Nigerian startup?

Keen international interest in Nigerian start-ups has seen funding rise steadily since 2016. In 2020, $150.36mn (21.4% of Africa’s total) was raised across 85 Nigerian startups, putting Nigeria in second place just behind Kenya which raised about $191mn. By September 2021, an estimated $248mn in funding had been secured with the fintech space being the most attractive to investors. A key piece of legislation (The Nigerian Startup Bill) is also in the works, aimed at empowering the Nigerian tech ecosystem by nurturing collaboration between stakeholders in the startup space and Nigerian regulators. While the potential for disruption has become a major cause for concern, especially in the financial industry, it has also become clear that the possibilities are seemingly endless and this is only just the beginning of the golden age of Nigerian startups.

Economic Diversification

Nigeria’s economic problems are well known, documented and over-laboured. The over-reliance on oil has been at the centre of this and the economic diversification rhetoric peddled by successive regimes has achieved little. However, it is important to note that while Nigeria’s GDP is highly diversified with 46 sectors, revenues from oil & gas form the basis of the government’s budget plans and is the principal forex earner. Diversifying government revenue will mean “growing the cake” and then taxing it. This must be hinged on competitiveness which will only be driven by investments in infrastructure and policy reform that liberalizes markets.

In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.

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