Nigeria more exposed to global economic crisis — Rewane
Rewane, who is the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, said the country used to be insulated against global developments, but had become integrated with the global markets in terms of foreign portfolio investment, foreign direct investment and trade flows.
Rewane stated this at this month’s edition of the LBS Breakfast Session in his presentation, a copy of which was obtained by our correspondent on Thursday.
He said the global recession fears had been exacerbated, with the United Kingdom, Germany, Turkey and Singapore among key economies on the verge of a recession.
He said, “The US is the trigger of trading and financial instability. Manufacturing index is down in every major country except India. Consumer confidence is down. The US consumer is worried about stagnant wages. Global stock markets are in turmoil.
“The reality is that the global economy is now teetering on the brink of a cyclical downturn. To most Nigerians, the question is whether the country is adequately prepared or you as an individual have fastened your seat belt for the turbulent times ahead.”
Rewane noted that the nation’s Gross Domestic Product in the second quarter declined “well below expectations, making the attainment of the annual projection of 2.2 per cent a tall order.”
He said “The Q2 GDP data shows growth of 1.94 per cent, which is lower than the Q1’s growth of 2.10 per cent. It serves as a wake-up call to policymakers that the economy is in desperate need of a fiscal stimulus.”
He added that most interest rate-sensitive sectors contracted and job elastic-sectors languished on the slow lane.
The FDC boss said the nation’s economic growth would remain lacklustre in the third quarter, with the GDP growth projected to inch up to 2.10 per cent.
On the recent foreign exchange restriction on food imports, he said, “Import prohibitions [are] likely to result in spike in imported inflation, pushing headline inflation to 11.5 to 13 per cent in Q4.”
Rewane predicted that the external reserves would fall to $42bn in September owing to lower oil price, with the naira projected to depreciate to N362- N363/$.
He said, “The price of oil in August was below $60 per barrel and the external reserves are sliding towards $43bn. The last thing Nigeria needs at this time is any threat to its hard-earned reserves especially with the P&ID judgement of $9.6bn against the country.
“This unfortunate saga in which the country did not receive any value but is being asked to pay billions of dollars is needed just as much as a bullet in the head. The possibility of Nigeria facing a fiscal shock is high, if oil prices slide below $55 per barrel.”
Rewane added, “While you may likely be distracted by the unfortunate xenophobic tit for tat between South Africa and Nigeria, there remains an underlying threat to macro-economic stability with falling commodity prices.”