In the last six months, Nigeria witnessed little to zero appreciation in economic activities; the novel virus of 2019 takes credit in part for that. The second fiscal quarter further ushered in a 6.05 per cent slump in gross domestic product, per the Nigerian Bureau of Statistics (NBS) report. And while the oil sector typically takes the blame for these economic issues, non-oil economic activities contributed to the negative returns witnessed. Most noteworthy, the decline in the non-oil sector would be the first since the notorious slump of 2016.
Bad news aside, however, we move. So, looking to the future, Dataphyte highlights five events that may still shape the economy in September:
1. Reopening of international flight
In March 2020, the country’s aviation regulator – Nigerian Civil Aviation Authority – announced restriction of international flights into Nigeria at the height of the COVID-19 pandemic. Since then, the crisis has threatened 124,000 aviation jobs in Nigeria and about $900 million of the country’s GDP, according to the International Air Transport Association (IATA).
Ahead of the September 5th reopening, the economy will witness positive outcomes as the country continues to ease lockdown measures, and most Nigerians continue to implement safe practices.
2. Edo Election
Political heavyweights are already battling for the reigns in Edo state. The Federal Government-led ruling All Progressives Congress (APC) and the key opposition party, Peoples Democratic Party (PDP), will battle for the gubernatorial seat. Two prime candidates are at the forefront; incumbent Godwin Obaseki, who decamped to the opposition party – PDP, and Osagie Ize-Iyamu of the APC.
The pre-election battle and outcome will significantly affect the economic direction of the country amidst COVID-19. The election will also serve as a litmus test for the electoral umpire – Independent National Electoral Commission (INEC) ahead of the Ondo governorship race. Fixed for September 19, the election will also determine Nigeria’s preparedness in conducting free and fair elections during a health-crisis period.
3. CAMA – Arguments for and against
The newly passed Companies and Allied Matters Act, 2020, has been a subject of debate in recent times. The Act, which repeals and replaces the Companies and Allied Matters Act, 1990 (the “Repealed Act”), was recently signed into law by President Muhammadu Buhari. The essence of the CAMA 2020 is to boost the Ease-of-Doing-Business. Since the passage, different provisions have met criticisms from stakeholders, including the power of the Corporate Affairs Commission (CAC).
Meanwhile, a Lagos based lawyer has threatened to sue the government over grey areas in the Act. So, expect dialogue around the Bill in the coming weeks to alter Nigeria’s economic landscape.
4. Stock Market – Investors to react to corporate earnings, GDP figure
The recent second-quarter GDP figures have everyone talking, investors included. But what perhaps has us thinking is the outcome to the former. We may see them take sides as companies continue to drop their corporate earnings in September. Last week, the market gained N45 billion with the Financial Services industry (measured by volume) leading the chart with 586.761 million shares valued at N4.022 billion.
The All-Share Index and Market Capitalisation appreciated by 0.35%; closing the week at 25,309.37 basis points and N13.203 trillion, respectively. Since the beginning of 2020, the stock market has dropped by 5.71%; presently, profit takers are hopping on corporate earnings and dividends.
Another addition to the economy is the global prices of crude oil. Currently, Brent crude’s price is posting a momentum gain above $46 per barrel as economic activities bounce back. If this continues, the economy will take shape as we move towards the post-COVID-19 era.
5. CBN Policies on foreign Reserves, FX, and the Naira
Last week, the Central Bank of Nigeria adjusted its policy on foreign exchange to halt overpricing. The fiscal regulator further opened Forms ‘M’ for dealers whose payments are routed through a buying company/agent or any other third parties.
Forms M is a mandatory statutory document all importers in Nigeria fill out. And before now, authorised dealers used it for payments in favour of the ultimate supplier of the product or service. The process allows CBN to allocate dollars at a subsidised rate for specific businesses.
In a circular, the apex bank said the policy would ensure judicious use of foreign exchange resources.
The Manufacturers Association of Nigeria (MAN) has kicked against it, saying it will cause significant business disruption for many companies as over 78.2% of such companies would close shops.
The Nigerian naira trades at N465 on the street, N379 at the official market, and N386 at the Investors’ & Exporters’ FX Window, against a US dollar. Without a doubt, the impact of this policy will show on businesses; it also questions the ease-of-doing-business campaign of the government.