Nigeria’s effort to claw its way out of the economic downturn arising from the adverse impact of the COVID-19 pandemic, which consequently led to the decline in crude oil prices is expected to be extended by three months. This is as a result of the vandalization of public and private properties by hoodlums in the wake of the alleged shooting of peaceful protesters in Lagos State, the Chief Executive Officer of Financial Derivatives Company (FDC), Mr. Bismarck Rewane, has stated.
Rewane, during the November edition of the Lagos Business School’s (LBS) monthly executive breakfast session, with the theme, “RE: ENDSARS – Class Struggle Versus Ethnic Conflict,” added that the government would need at least $6 billion worth of imports to cover looted, damaged and burnt inventory carried out by hoodlums during the protest.
“The recovery path is now elongated by at least three months; companies will need to restructure their maturities and debt repayment; sales of FMCGs will be negatively affected, especially rosy Christmas projections; the exchange rate for replacement inventory will be at least 10-15 percent higher; foreign exchange rationing effect on Consumer Performance Index (CPI),” Rewane said.
However, he urged the federal government to look at the recent #EndSARS protests as a wake-up call for structural economic change and resetting the button for economic reform.
He said some analysts have erroneously diagnosed the protests as symptoms of an ethnic conflict whilst it is fundamentally a class struggle of young people who have lost hope of prosperity.
Rewane, a member of President Muhammadu Buhari’s Economic Advisory Committee, said: “The Nigerian masses have been afflicted with rational ignorance, which has mutated into rational irrationality. The riots may erupt again if nothing is done to address poverty, debt and low productivity. New investment is necessary and urgently needed to keep hope alive.
“Based on anecdotal and momentum analysis, our model is projecting an estimated total informal and formal economic loss of approximately $15 billion in 2-3 weeks of mayhem.
“Many traders and stores do not have insurance against civil unrest and commotion. Christmas is fast approaching and they cannot find forex to replace lost inventory. This is in addition to the climbing COVID-19 infection rate.”
He added that the leading economic indicators (LEIs) in the country are presently under pressure as oil prices fell by over 10 percent in October, while Brent, the global benchmark for crude oil, currently stands at 41 percent below its 2020 peak.
Based on this, he said the federal government would need to invest significant amounts in completing infrastructure and poverty allocations, adding that the foreign exchange rate of N379/$ may need an adjustment and huge sales to replenish lost inventory.
According to Rewane, “At least $6 billion of imports is needed to cover looted, damaged and burnt inventory.”
On his outlook for Nigeria’s oil production, he said production and rig count would continue to decline, adding that October production estimate was 1.45million barrels per day (bpd).
He gave 1.42 mbpd as the estimated production in November while noting that the number of active oil rigs has also dropped.
According to him, as Nigeria continues paying for cheating its quota, the Organisation of Petroleum Exporting Countries and its allies otherwise known as OPEC+ will maintain strict compliance to oil production cut and sanctions on oil cut cheats.
On the economic outlook, Rewane predicted that the 2021 national budget may be revised as a result of the impact of lower oil prices and higher expenditure as well as the #EndSARS crisis – which, will deepen the economic crisis and delay the recovery.
He stated that total debt stock to Gross Domestic Product (GDP) increased to 17.8 percent while total external debt will rise to $52.2billion in 2020.
“The budget will be reviewed drastically to accept lower oil prices as normal; OPEC+ will push for further cutbacks on quota; Nigeria’s quota could fall to 1.3mbpd,” Rewane said.
The country’s Gross Domestic Product (GDP) had contracted by 6.10 percent (year-on-year) in real terms in the second quarter of the year (Q2 2020), according to the National Bureau of Statistics (NBS).
The expectation is that the economy will slip into recession when the GDP figures for the third quarter are released this month, with the expectation of a rebound in 2021.