…Nigeria, others get $40b as global FDI falls to $1.2tr
International oil price, yesterday, reversed its two-week
upwards movement, slashing $2 to hover at $60.90 over fears of excess supply
from non-OPEC member nations.
Specifically, the prices of Brent, West Texas Intermediate,
WTI, and OPEC basket stood at $60.92, $52.18 and $59.63 respectively.
At the current price, Nigeria’s 2019 budget benchmark of
$60.00 per barrel appears threatened again.
However, despite the fall in the general price level, the Organisation of
Petroleum Exporting Countries, OPEC, remained optimistic of achieving market
stability. In its latest report sent to Vanguard, OPEC stated that stability is
gradually returning to the market, which witnessed price slump from $85.00 in
October to less than $50.00 in December 2018, especially as the Joint
Ministerial Monitoring Committee (JMMC) was working to achieve the mission.
It stated: “The Joint Ministerial Monitoring Committee
(JMMC) has expressed its utmost satisfaction with the steady and robust
achievements of the two-year old ‘Declaration of Cooperation’ between OPEC and
participating non-OPEC oil producing countries.
“The JMMC noted that countries participating in the
‘Declaration of Cooperation’ achieved an overall conformity level in November
2018 of slightly below 100%, hitting 98% for the month. “It is evident that
significant progress has been made towards the goal set at the 4th OPEC and
non-OPEC Ministerial Meeting of 23 June 2018, whereby countries agreed to
strive to adhere to the overall conformity level, voluntarily adjusted to 100%,
as of 1 July 2018 for the remaining duration of 2018.”
“The overall conformity level since the beginning of the
‘Declaration of Cooperation’ in January 2017 is well above 100%, coming in at
116%. “The Committee confirmed the attached new voluntary production
adjustments effective as of 1st of January 2019 for an initial period of six
months, based on the unanimous decisions taken at the 175th Meeting of the OPEC
Conference and the 5th OPEC and non-OPEC Ministerial Meeting on 7 December
2018.
“These voluntary
production adjustments will continue to be monitored by the JMMC on a monthly
basis, ably supported by the Joint Technical Committee and the OPEC Secretariat,
in an open and transparent manner.
“The JMMC calls on all participating countries of the
‘Declaration of Cooperation’ to redouble their efforts in the full and timely
implementation of the supply adjustments to ensure that the oil market remains
in balance in 2019.”
President Muhammadu Buhari had while presenting the budget
to the National Assembly stated: “The 2019 Budget proposal is based on the
following assumptions: Oil price benchmark of $60 per barrel; Oil production
estimate of 2.3 million barrels per day, including condensates; Exchange rate
of N305/$; Real GDP growth of 3.01 percent; and Inflation Rate of 9.98 percent.
“Notwithstanding the recent softening in international oil
prices, the considered view of most reputable analysts is that the downward
trend in oil prices in recent months is not necessarily reflective of the
outlook for 2019.
“However, as a responsible Administration, we will continue
to monitor the situation and will respond to any changes in the international
oil price outlook for 2019. With regard to oil production, I have directed the
NPPC to take all possible measures to achieve the targeted oil production of
2.3 million barrels per day.”
In the meantime, global foreign direct investment (FDI) fell by nearly a fifth
in 2018, to an estimated $1.2 trillion from $1.47 trillion in 2017, according
to the latest UNCTAD Global Investment Trends Monitor released on Monday, with
Nigeria and Angola experiencing weak performance.
The drop, the third in as many years, brings FDI flows back
to the low point reached after the global financial crisis, with the decline
concentrated in developed countries where inflows fell by as much as 40% to an
estimated $451 billion.
UNCTAD shows that FDI to developing economies increased by
three per cent to $694 billion in 2018, and accounted for half of the top 10
host economies for FDI inflows.
Of the developing economies, Asia and Africa benefited the
most, with flows increasing to developing countries in Asia by five per cent.
The slight increase in FDI to Africa ($38 billion in 2017 to
$40 billion in 2018), was driven by strong performance in Egypt, and South
Africa and weak performance in Nigeria, and Angola.
Specifically, South Africa recorded 446% increase, Egypt up
by 7%, while Nigeria was down by 36% (to $2.2.bn in 2018 and was overtaken by
Ghana who received $3.3bn).
“The underlying FDI trend has shown anaemic growth since the
global financial crisis, and has been on a downward trajectory since 2013,”
James Zhan, Director of UNCTAD’s Investment Division said.
“The factors behind this negative trend, such as lower
profitability of foreign investment and shifts in global value chains, are not
changing in the near future. The macro-economic backdrop is also
deteriorating,” he said.
According to UNCTAD, the 2018 FDI decline stems from
corporate income tax reform in the United States. From 2017, U.S. multinational
enterprises have embarked on a large repatriation of accumulated foreign
earnings, a move which has hit Europe hard.
In 2018, Europe’s foreign investment inflows amounted to
$100 billion – an unprecedented 73% decline – and a value last seen in the
1990s. The U.S. also saw its inflows dip to $226 billion, a decline of 18%.
In contrast, global cross-border mergers and acquisitions
were up 19%, and announced greenfield investments were positive, up 29%,
indicating that FDI could improve in 2019. Meanwhile, developing economies’ FDI
flows have been more resilient.
East and South-East Asia, where inflows were up two per cent
and 11% respectively, took the lion’s share of foreign investment, accounting
for one-third of global FDI in 2018, and almost all growth in FDI to developed
economies.
“South East Asia is the main FDI growth engine,” said Mr.
Zhan, with the region rebounding from a dip in 2017, buoyed by growth in
Indonesia and Thailand.
Greenfield announcements in developing economies rose by 47%
reaching an estimated $539 billion and linked to Asian growth prospects.
African FDI flows were up six percent, though growth was
concentrated only in a few countries such as Egypt and South Africa.
“Slow economic recovery in Latin America and the Caribbean
saw flows drop by four per cent,” Mr. Zhan added.
While the outlook is more positive for 2019 with a rebound
expected, Mr. Zhan said there are still many uncertainties facing the global
economy.
“Beyond the immediate impact of economic headwinds, the
underlying trends for global FDI remain weak, driven by one-off factors such as
tax reforms, megadeals and volatile financial flows,” says Zhan.
“As the initial flood of earnings repatriations in the
United States abate, things will normalise rebounding to ‘average’ levels of
inflows. But the outlook for the global economy is darkening, underpinned by
structural factors in the economy.”
These include policy factors, trade tensions, and a return
of protectionist tendencies.
In addition, the strengthening of the digital economy and thus a shift toward intangibles in international production will play a role, alongside significant declines in FDI returns, already evident over the past five years.
Vanguard with additional report from Guardian NG
