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Oil prices: NECA urges aggressive policies to sustain economic recovery

Oil prices: NECA urges aggressive policies to sustain economic recovery
Written by Maritime First

…As NBS says Capital importation into Nigeria stood at only $5.8bn in Q1***

With tumbling oil prices and Bureau of Statistics (NBS) revelation that total value of capital importation into the country stood at only $5.8 billion in the first quarter (Q1) of 2020, the Nigeria Employers’ Consultative Association (NECA) has urged fiscal and monetary authorities to develop more aggressive and decisive policies to sustain economic recovery.

The Director-General of NECA, Mr Timothy Olawale, who made the call on Tuesday in Lagos said, “in our analysis of the country’s economy, we observed a strong correlation between global oil prices (brent) and the country’s Gross Domestic Product (GDP) between Q1 2014 and Q1 2020.

“This indicates that the direction of growth is pretty much determined by the direction of oil prices, it can be adduced that a dollar increase in global oil prices corresponds with average 0.1 per cent rise in growth.

“A similar trend was witnessed in Q2 2017, when the country exited from recession, it was not buoyed by government policies, but rather rebound in oil prices.

“This calls for a more drastic management of the country’s economy from the global shock of oil prices.”

The director-general noted that the slowdown in the GDP growth reflected the earliest effects of the disruptions on the non-oil economy, coupled with an escalating war of words between the U.S. and China which resulted to low demand in global oil.

He said that the lockdown of the country’s economy commenced in April due to the pandemic, and therefore, the real impact of COVID-19 on the economy would be felt in the Q2 GDP result.

“We anticipate contraction in the second quarter, as the economy witnessed a six week’s lockdown on the commercial nerves of the country, and a similar trend witnessed in the global economy.”

Also read:  Customs obstructions hindering ease of doing business, says NECA

However, China was an exception with the consumption of fuel due to opening of industrial hubs and transportation could portend mild positive growth patterns due to demand for crude oil,” he said.

Olawale said that more coordinated stimulus packages targeted at the worst-hit sectors of the economy would sustain the economy from experiencing contraction of 8.9 per cent as predicted.

“Creating enabling environment for the non-oil economy to be the major contributor to the revenue profile will salvage the economy from external shocks.”

In the meantime, the National Bureau of Statistics (NBS), has put the total value of capital importation into the country at only 5.8 billion dollars for the first quarter (Q1) of 2020.

The NBS made this known in its latest report on  “Capital Importation” released on Tuesday.

It explained that the amount represented an increase of 53.97 per cent compared to Q4 2019 and -31.19 decrease compared to the first quarter of 2019.

The bureau noted that the largest amount of capital importation by type was received through portfolio investment, which accounted for 73.61 per cent which was 4.3 billion dollars of total capital importation.

According to the NBS, this is followed by other investments which accounted for 22.73 per cent of 1.3 billion dollars of total capital and the Foreign Direct Investments (FDIs) which accounted for 3.66 per cent of 214.25 million dollars of capital imported in Q1 2020.

It, however, disclosed that by sector, capital importation by banking dominated Q1 2020, reaching 2.9 billion dollars of the total capital Importation in Q1.

“The United Kingdom emerged as the top source of capital investments in Nigeria in Q1, 2020,  with 2.9 billion dollars which accounted for 49.68 per cent of the total capital inflow in Q1 2020.

“By destination of investment, Lagos state emerged at the top destination of capital investment in the country in Q1 2019 with 5.1 billion dollars.

“This also accounted for 87.72 per cent of the total capital inflow in Q1 2020.

“By bank, Standard Chartered Bank of Nigeria emerged at the top of capital Investments in the country in Q1 2020 with 1.6 billion dollars and this accounted for 28.3 per cent of the total capital inflow in Q1, 2020” the bureau said.

 

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Maritime First