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How can African Economies Leverage the Crisis to Spur a New Growth Model

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For a country that has only recorded supply-shock-led recessions (FX shortage vis a vis oil price and output), a delay in containing the spread of COVID-19 poses a triple threat to the economy.

Economic Impact Of The COVID-19 On Nigeria’s Real Sector

Vetiva’s Economist, Mosope Arubayi, in a report, said: “The region’s vulnerabilities stem from its weak public health systems, impact of lockdowns on livelihoods and businesses and the resource-dependent nature of the region.”

https://www.thisdaylive.com/index.php/2020/05/12/vetiva-covid-19-has-dampened-economic-outlook-of-sub-sahara-africa/

A recourse to borrowings could increase the country's financial liability to FPIs in debt securities and also support FX inflow into the country. However, existing safety-conscious FPIs will continue to pull their funds from Nigerian assets, putting pressure on the CBN's FX reserve assets.

https://www.proshareng.com/news/Oil%20&%20Gas/Massive-Supply-Overhang-to-Keep-Crude-Prices-Subdued/49800

Vetiva Capital’s Chief Economist, Mosope Arubayi, says that although Nigeria’s total debt to GDP ratio is below the suggested prudential upper band of 40% for developing economies, a higher than projected fiscal deficit, high cost of borrowing and weaker Naira may further limit Nigeria’s fiscal space and reduce the capacity to respond to the Covid-19 crisis.

https://tv.guardian.ng/news/business/covid-19-vetiva-capitals-fiscal-outlook-for-nigeria/

Commenting on the development, Vetiva’s Chief Economist, Mosope Arubayi, said downside risks still exists in respect of the naira as external sector factors are currently not favorable and could result in speculation-driven demand for foreign currency.

https://www.thisdaylive.com/index.php/2020/07/08/vetiva-predicts-stability-for-naira-in-near-term/

“We won’t have as much money to drive the infrastructure plans that the government intends to implement to open up activities in different sectors of the economy,” Mosope Arubayi, chief economist at Lagos-based Vetiva Capital said by phone.

https://www.bloomberg.com/news/articles/2020-10-14/subpar-economic-recovery-seen-piling-more-pain-on-nigerian-banks

“Oil prices didn’t recover strongly as many had anticipated with the reopening of the economies,” Mosope Arubayi, the chief economist at Lagos-based Vetiva Capital Management Ltd., said by phone. The depreciation “basically signifies some pressure on CBN right now,” she said, referring to the central bank.e region’s vulnerabilities stem from its weak public health systems, impact of lockdowns on livelihoods and businesses and the resource-dependent nature of the region.”

https://www.bloomberg.com/news/articles/2020-11-30/naira-hits-four-year-low-as-nigeria-central-bank-adjusts-rate

The fallout will worsen if the unrest drags on and violence that has erupted in recent days intensifies, according to Mosope Arubayi, chief economist at Vetiva Capital in Lagos.

https://www.dailymaverick.co.za/article/2020-10-20-curfew-shuts-biggest-african-city-as-nigeria-protests-spread/

Mosope Arubayi and Ibukun Omoyeni, both analysts at Vetiva Research, in their review of the inflation figures noted that for the first time since 2016, consumer prices are set to undergo 12 consecutive months of inflationary pressures in a given year.

As recession continues, inflation rate rises to 14.89%

Positioning for an inclusive post-COVID recovery

https://www.kenyalondonnews.org/2021-africa-macroeconomic-outlook/

“If growth fundamentals and outcomes improve in the near term, the committee may tend toward tightening much later in the year,” said Omosalewa Arubayi, chief economist with Vetiva Capital Management. “Nigeria’s current inflationary pressure is driven primarily by supply constraints, while monetary components play a secondary role.”

https://www.bloomberg.com/news/articles/2021-05-17/key-african-central-banks-may-hold-rates-on-growth-concerns

“The risks to inflation are limited in the near term, and it makes an easy decision to stand on policy parameters at the July meeting,” said Mosope Arubayi, an economist at IC Asset Managers. “Their stance may change, however, at the last or final meeting of the year if trends in the global economy continue to promote an economic victory for Nigeria.”

https://www.bloomberg.com/news/articles/2021-07-18/african-central-banks-to-hold-key-rates-amid-virus-resurgence

“Inflation and currency risk are a thing now, so my investment choices will be centred around protecting my investment against the adverse impact of both. My first consideration will be dollar-denominated assets as they could help with value preservation. The choice of assets and level of expertise will then determine the level of profitability. Top on my list of asset choices will be commodities and stocks.”

Where to invest N1 million right now

“There is a whole lot of pressure to invest in foreign assets because of what is happening to the naira,” said Mosope Arubayi, an economist at IC Asset Managers in Lagos. The central bank should learn that the restrictions are stopping people from accessing the official window for their legitimate transactions, she said.

https://www.bloomberg.com/news/articles/2021-09-16/dollar-fire-power-boosts-nigeria-s-naira-fight-decision-guide

The first order of business in 2022 is to protect your portfolio from inflation, if you have not already done so, as inflation is likely to remain above recent historical norms. In times like this, commodities provide an effective hedge.

Where Nigerians can invest their money in 2022

“It feels good to see the diligence of these women pay off,” said Mosope Arubayi, a female economist at IC Asset Managers. “The recent increasing number is just a case of opportunity meeting preparedness by the female bankers.”

https://www.bloomberg.com/news/articles/2021-11-08/women-are-taking-over-top-nigerian-banks-that-favor-male-clients

“Nigerians have to watch in utter disbelief how the rule of law and economic commonsense are being undermined,”

https://www.bloomberg.com/news/articles/2022-05-17/central-bank-governor-ends-bid-to-become-president-of-nigeria

"He has always been pro-growth, and inflation tolerant, with biases against adjusting the naira exchange rate and raising interest rates."

https://www.bloomberg.com/news/articles/2022-05-24/with-political-hopes-dashed-nigeria-s-emefiele-focuses-on-rates

Mosope Arubayi, economist at IC Group, an investment consultancy, said Nigeria had become less attractive for foreign investors, partly thanks to the difficulty of repatriating revenue. “The FX market is very tight in terms of liquidity,” she said. “Nigeria relies significantly on oil inflows, but you need other flows of capital like remittances, most of which do not go through official channels.”

https://www.ft.com/content/f69a9464-7f82-472c-95e9-37fb72cac88f

"People are sceptical about it and afraid of their money disappearing without anyone to hold accountable"

https://www.ft.com/content/e0b7f134-c935-4cd6-bf27-460c37db1512

“It will impact the economy negatively, especially the huge informal sector,” said Mosope Arubayi, an economist at IC Group. “It used to be dollar crisis, now it’s like we have naira crisis.”

https://www.bloomberg.com/news/articles/2023-02-21/lack-of-cash-is-stalling-nigeria-s-220-billion-informal-economy?srnd=premium#xj4y7vzkg

Nigerian Central Bank Scraps Rate Meeting Even as Naira Plunges

https://www.bloomberg.com/news/articles/2023-11-20/nigerian-central-bank-postpones-interest-rate-decision-again

“The economy is a few meters from going bust,”

https://www.bloomberg.com/news/articles/2023-11-20/nigerian-central-bank-postpones-interest-rate-decision-again

"Declining capital flows mean that the government’s income will reduce"

Massive FDI slump spotlights how badly Nigeria is being run

"Another 50 basis points is what I believe wil be delivered by the next meeting, because inflation expectations are still very much on the rise due to ongoing foreign currency and fiscal reforms."

https://abokifx.com/news/inflation-quickens-just-as-nigeria-declares-food-price-emergency-bloomberg?type=market

In Nigeria, an investment banker to the rescue of Africa's largest economy

https://www.lemonde.fr/afrique/article/2023/10/10/au-nigeria-un-banquier-d-affaires-a-la-rescousse-de-la-premiere-economie-d-afrique_6193606_3212.

Still, partially removing the restrictions, “could over the next few months enhance the supply of foreign exchange and increase government control over available foreign currency balances,”

https://www.bnnbloomberg.ca/nigeria-scraps-dollar-deposit-cap-as-it-liberalizes-market-1.1935110

“Depositors with dollar deposits who need naira will have to sell their dollars,” The measure “means the naira is likely to appreciate again in the parallel market against foreign currencies,”

https://www.bnnbloomberg.ca/nigeria-central-bank-offers-dollars-at-1-101-naira-to-fx-bureaux-1.2056322

“It does not address the fundamental issue of lack of confidence in the local currencies. You cannot restore confidence by criminalizing or arresting people. Besides, these traders do not quit the trade but just go underground and devise more creative means to continue their business,”

https://www.bloomberg.com/news/articles/2024-05-31/zig-ssp-ngn-usd-street-currency-dealers-in-africa-face-off-against-governments

Public Engagements

VIDEO GALLERY

How can African Economies Leverage the Crisis to Spur a New Growth Model

MO' IN PRINT