Nigeria will struggle as recovery proves elusive
The World Bank’s decision to postpone its board meeting that was scheduled to hold today till October is a likely sign of the multilateral agency’s growing impatience with Nigerian policy ambivalence on exchange rate unification and the adoption of cost-reflective tariffs. The meeting was to deliberate on the $1.5bn COVID support facility and the $750mn power infrastructure funding. The Nigerian policymakers have been procrastinating on exchange rates for some time. Now it seems that the chickens are coming home to roost.
The silver lining is that the CBN & Finance Ministry are now likely to resolve these issues as a matter of urgency just as the external reserves haemorrhage continues (now at $35.71bn). In the meantime, the CBN will continue to drawdown on the external reserves to meet its backlog of commitments. However, investors will remain jittery just as the likes of Shoprite contemplate their future in Nigeria. Consumer aggregate demand will also struggle to recover to pre-pandemic levels as evident in the payments and settlements data. Total value of cheque transactions was N251bn in July, which is 32% lower than the value in January (N367bn). This becomes more relevant with the recent 3% increase in PMS price to N148.7 per litre.
The curse of a second wave of infections
The future is looking bleaker for Africa as infections cross the 1million threshold. South Africa currently accounts for 53% of Africa’s total cases and is on the heel of a resurgence in infections. It has tested 4.8% (2.83million) of its population compared to its SSA peers, Nigeria (304,221) and Ghana (407,588). Testing and resource capacity have been major constraints in the region, forcing many countries to depend on the number of fatalities as an anecdotal proxy of the COVID picture. As fatalities continue to climb, Nigeria is at a risk of heightened panic and social unrest.
In this edition of the LBS Breakfast Session, Bismarck Rewane and the FDC Think Tank attempt to provide an insight into the implications of a COVID-19 resurging scenario on policy & business strategy.
Enjoy your read.