Dear subscriber,

Plugging the Deficit

As Nigeria’s debt soars, the federal government has revealed plans to securitize its existing debt to the CBN by designing “special instruments”. This will lead to an injection of over N11trn in fixed income instruments into a market saturated with liquidity. It will bring about balance and spark a rise in interest rates. The government has also ruled out further borrowing from the IMF, partly as a psychological spillover of the past and partly due to stringent conditionalities, to plug its proposed fiscal deficit of N5.7trn in 2021. While this is likely to ease pressures on growing external debt and exchange rate volatility, the likely increase in domestic debt issuances will result in a crowding out of the private sector.

OPEC: Simply can’t catch a break

Oil prices have surged to an 11-month high of $56pb, riding on positive sentiment sparked by Saudi Arabia’s surprise move by to add an extra 1mbpd to OPEC+’s output cuts. However, reinstated lockdown measures as COVID-19 infection rates surge in advanced countries is set to constrain oil demand in the first quarter of 2021.

AfCFTA: Not without its winners and losers

AfCFTA has been heralded as a silver bullet of sorts that would spark an acceleration in intra-African trade, lead to the diversification of exports and structural transformation while supporting rapid industrialization and specialization. However, the launch of the single market also means the survival of the fittest – compete or die. This is what domestic automobile assembly industry is now faced with as the import levy on cars has been reduced from 30% to 5%.

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.

Enjoy your read!