World Bank Predicts Global Economy will grow 3.1% in 2018

The World Bank (International Bank for Reconstruction for Development) released their report for 2018 titled Global Economic Prospects; Broad based upturn, but for how long? The President of the World Bank Jim Yong Kim said “The broad based recovery in global growth is encouraging but this not a time for complacency. There is a great opportunity to invest in human and physical capital, If policy makers around the world focus on these key investments, they can increase the countries’ productivity, boost workforce participation, and move closer to goals of ending extreme poverty and boosting shared prosperity.”

While saluting the upswing in oil production that has helped to stabilize the nation’s productivity and currency markets, it says non-oil industrial sector has weakened due to inadequate power generation that has hurt manufacturing and construction. In the Year 2017, Nigeria through its ministry of finance used the debt capital markets to raise nearly $6bn internationally. It raised $3bn from the Eurobonds market to refinance maturing payments to bondholders, and $2.5bn to fund a supplementary budget. It floated another $300m diaspora bond for Nigerians who live and work abroad. In a response to the success of these listings, the World Bank says “Sovereign bond issuance rebounded in 2017, and improved global sentiment towards emerging and frontier markets helped narrow sovereign bond spreads”.

The increase inflow to the Nigerian Stock Markets that made NSE the 3rd best performer in terms of return on equity for 2017, as well as the increased deal making experienced can be attributed to improved access to foreign exchange that has root in several factors like:

  1. Ban on provision of FX for 41 imported items
  2. Establishment of the Investor & Exporter window through the Nigeria Autonomous Foreign Exchange Fixing (NAFEX)
  3. Increase in the price of oil that has raised oil revenues and the ability of the CBN to supply the markets through wholesale dutch auction system

It however cautioned that “Although firmer commodity prices encouraged foreign investments in the hydrocarbon and mining sectors, foreign direct investment inflows to the region are expected to increase only moderately. As a consequence the level of foreign exchange reserves in the region continued to be low. The median level of reserves was equivalent to 3 months of imports in 2017, the same as in 2016, but below its peak of 3.9months of imports in 2014, pointing for the need for countries in the region to build external buffers.”

The World Bank says food price inflation as a result of poor harvest across the country and access of foreign exchange on certain items is responsible for the headline inflation remaining at 15.94%


Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.