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ECONOMY

Why Has the Subsidy Removal Policy Failed?
At the moment, there seems to be a consensus among intellectuals and institutional bodies like the IMF and the World Bank on the potential positive impact of the removal of subsidy on the economy. Their arguments are pretty broad and far-reaching. They submit that subsidy payment continues to widen the inequality gap in the country since petroleum subsidy is an implicit subsidy (financing consumption), and the wealthy who consume more than the poor citizens whom the government seeks to protect from the high fuel price also benefit from the regulated price. At the same time, their taxes have not increased commensurately.
Nigeria: A Frail Giant?
Since President Muhammadu Buhari's re-election in 2019, the country has faced a myriad of social and economic challenges. Inflation had surged from 11.40% in May 2019 to 17.33% last month; the Naira has been devalued three times, losing 33% of its value, insecurity has increased, and the general investment climate has waned. All these have happened while Nigerians have not seen any meaningful increase in their economic welfare: the country slumped into a second recession in five years. Many states have found it challenging to implement the new minimum wage signed into law in 2019. We also note that even if all the states had implemented the new minimum wage, the total number of civil servants to the entire labour force is considerably low. To sum it, you would still be worse off if you hold 2X the same Naira note you had in 2010 today.
The Unholy Union Between the Naira and Devaluation
In 2020, the Naira lost 25% and 27% of its value at the NAFEX and parallel exchanges, respectively. This quickly disrupted my plans, as I had planned to upskill and purchase some courses priced in dollars at the onset of the year. My disappointment prompted me to visit the CBN's website in search of its policy stance per the Naira. The website says the apex bank's exchange rate policy is managed floating - a market-friendly term adopted by developing countries who operate some form of pegged regime. I murmured, why did the Naira not appreciate, and why is it always under severe downward pressure?
A Beginner’s Guide to CBN’s Ways and Means to the Federal Government of Nigeria
CBN’s financing of the FGN deficits seems to be a structural one and not a one-off event. This is because historical data has shown that the CBN has been financing a huge part of the FGN deficits even when there was no economic downturn. For example, out of the total fiscal deficit of N3.64 trillion in 2018, the CBN financed 52.2%. In 2019, the total fiscal deficit was N4.23 trillion and the CBN financed 78.3% or N3.31 trillion of that amount. There was no downturn during those periods, hence it goes against economic theory for the CBN to be printing money to finance significant proportions of the FGN’s fiscal deficit.
Why Restricting FX For Food Import is a Misplaced Priority
When you look at the size of Nigeria's neighbours, you wonder what all the fuss is about. You worry about smuggling but look at the total size of Benin's imports - ridiculously low. Others too. How are these tiny, poor countries preventing Nigeria's industrialisation?
Policy Trilemma and Interest Rate Behaviour in Nigeria
Policy makers face trade-off in dealing with exchange rate management, monetary independence and concerns about capital mobility simultaneously. This study empirically examines the effects of Nigeria’s trilemma policy path on interest rate using data spanning from 1997:Q1 to 2017:Q3. It equally incorporates the role of external reserves in buffering these effects.
The Economics of Big Brother Naija (BBN)
A huge part of the revenue from SMS goes to the telecoms operators. Specifically, MTN rakes in 70% of the revenue, Glo rakes in 80% while Airtel rakes in 75%. Withholding tax of 10% is also charged and the value-added service provider (the shortcode- 32052) receives 5%. By taking the average, we estimate that Multichoice only receives 15% of the SMS revenue. Hence, It is not as rosy as you might have been thinking especially when it comes to revenue from the SMS voting platform. Multichoice gets more revenue from sponsorships than from the voting platforms.
Implication of the Forex Ban on Food Items
With 84% of Nigeria’s export (as at Q2’2020) as oil products, we reiterate that Nigeria does not really have an import problem. Nigeria has an export problem and until that problem is solved, average Nigerians will always suffer higher commodity prices due to the demand management strategy of the CBN anytime external shocks occur in the oil market.
[Archive] From Recession to Growth: The Story Of Nigeria’s Recovery from the 2016 Economic Recession
Being a Paper presented by Godwin I. Emefiele, Governor, Central Bank of Nigeria at the Special Convocation of the University of Nigeria, Nsukka, on Friday, May 17, 2019 at the Princess Alexandra Auditorium, University of Nigeria, Nsukka, Enugu State

BUSINESS & FINANCE

Uncertainty Grips Markets as Optimism Wanes
Amid the prolonged and painful pandemic, risks to global financial stability have remained contained—so far. But with economic optimism fading, and with financial vulnerabilities intensifying, this is a time for careful policy calibration. To an unprecedented degree, the world’s central banks, finance ministries, and international financial institutions have asserted—for a year and a half—policy support for economic growth. Now they must craft strategies that safely approach the next stage of monetary and fiscal policy action.
Crypto Boom Poses New Challenges to Financial Stability

As crypto assets take hold, regulators need to step up.

Crypto assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem. But along with the opportunities come challenges and risks.

Why Even The Most Elite Investors Do Dumb Things When Investing
If you’re Jeff Bezos, you’re not going to have some random dude manage your money and hope for the best. You’re not gonna open up a Robinhood account and risk it all on meme stocks like Gamestop. You’re going to hire the type of investor who has a PhD in mathematics and drives a Bugatti; a go-getter who wakes up with a turmeric latte and pores over satellite images of factories in Asia to predict the earnings of some 3D printing company most of us have never heard of. We’re talking about the best of the best in finance.
Nigeria’s Cement Industry in 2020: The Boom Amidst the Burst
Dangote cement plc reported a 23% Return on Invested Capital (ROIC), which overshot its nearest competitor (BUA) by 600bps. Lafarge came in a distant third with an ROIC of 6%. We, however, note the gradual increase in Lafarge's performance over the last five years as it continues to grow its ROIC from the 1% it reported in 2016. We believe this continued uptrend in its performance is hinged on the selloff of its South Africa operations, a strategic action that has continued to impact performance favourably.
Monetary Policy at a Crossroad: Policymakers Need to Break Promise of Easy Money to Avoid Boom-Bust
The Federal Reserve's new policy approach is that policymakers want to see "actual progress, not forecast progress" before deciding to change its policy stance. Substantial actual progress is occurring in the economy, some faster than others. How much monetary accommodation is needed to meet the ultimate employment and inflation objectives is debatable. But it is less than when the pandemic started and less after the passage of $1.9 trillion in federal stimulus. Determining when a policy stance has become too accommodative is not an easy matter—but enabling excessive risk-taking to become well-entrenched is comparable to past policy mistakes by allowing a build-up of inflation and inflation expectations. Both are difficult to unwind, and past episodes have shown it is impossible without triggering significant adverse effects in the economy.
Commercial Real Estate at a Crossroads
Empty office buildings. Reduced store hours. Unbelievably low hotel room rates. All are signs of the times. The containment measures put in place last year in response to the pandemic shuttered businesses and offices, and dealt a severe blow to the demand for commercial real estate—especially, in the retail, hotel, and office segments. Beyond its immediate impact, the pandemic has also clouded the outlook for commercial real estate, given the advent of trends such as the decline in demand for traditional brick-and-mortar retail in favor of e-commerce, or for offices as work-from-home policies gain traction. Recent IMF analysis finds these trends could disrupt the market for commercial real estate and potentially threaten financial stability.
Charting the Path towards Affordable Housing in Nigeria
Each time the word housing pops up, especially the challenges that come with owning /acquiring a house, Affordable Housing or Housing Affordability  follows as it is one of the major, if not the most severally cited, housing problems in the whole wide world. With a housing gap of 17 to 20 million units and a low estimated homeownership rate of 25%, Nigeria is not left behind in this problem. According to a UN report, Nigeria's population is about 186 million. Over 60% of these people will be living in urban areas in the coming years, hence needing a long-term plan to make housing accessible and affordable in the country. There are too many obstacles and bottlenecks in the housing sector, including the land use act.  In this article, I highlight ways housing can be more accessible irrespective of the sector's challenges.
Questions and Answers Segment with the Founders of SCALE
Being the transcript of the questions and answers segment of the discussions with the founders of SCALE which was held at the GIFTEDANALYSTS WhatsApp group chat on 20th March 2021.
How to Analyze the Financial Statement of Banks
Like any other companies, financial institutions prepare financial statements for regulatory purpose and assist their users in making economic decisions. However, banks' business models are different from other companies. Thus they attract a unique regulatory focus.

ANALYTICS

[Infographics] Financial Performance Summary of Selected Companies in Nigeria (2020)
Get the 2020 financial performance summary of some of the big names listed on the Nigerian Stock Exchange.
[INFOGRAPHICS] Banks’ Proportion Of Low-Cost Deposit(% CASA Mix, H1:2020)
High CASA mix enables banks to record lower Interest expenses, hence, a higher net interest margin.
[INFOGRAPHICS] Regional Unemployment Rate (August 2020)
The regional paradox - The Richer the oil, the higher the unemployment.
[INFOGRAPHICS] E-Business % Of Revenue of Nigerian Banks (H1’2020)
Nigerian Banks Electronic Transaction Revenue a question on efficiency of cashless policy.
[INFOGRAPHICS] Cash As A % Of Total Payments(Selected Countries)
Cashless policy a myriad in Nigeria payment transactions amongst other countries.
[INFOGRAPHICS] South African Vs Nigeria Banks (H1’2020)
South African banks are bigger than Nigerian banks in terms of Total Assets. However, Nigerian banks are more profitable, looking at return on Assets. Return on Assets talks about how they are able to utilize their balance sheet (mostly made up of deposits) to drive revenue. Return on Assets = Profit/Total assets. But why are Nigerian banks doing better? Take a look at the MPR. The MPR is the benchmark rate for asset pricing. For example, banks will set loan rate at MPR + Premium. For example, 12.5+3.5 = 16%. For South African banks, the MPR is low, hence the interest they will earn on loan will be lower compared to Nigerian banks. This means their interest income will be lower, hence their Return on Assets will be lower.
[INFOGRAPHICS] Poverty Rate By Sectors In Nigeria
Nigeria’s Poverty Rate by Sectors Will able-bodied young people be better off or worse off with Nigeria’s agricultural practices?
[INFOGRAPHICS] Loan Book and Non-Performing Loan of Nigerian Banks as at H1’2020
Loan Book and Non-Performing Loan of Nigerian Banks as at H1’2020

AFRICA & WORLD ECONOMY

Surging Energy Prices May Not Ease Until Next Year
Spot prices for natural gas have more than quadrupled to record levels in Europe and Asia, and the persistence and global dimension of these price spikes are unprecedented. Typically, such moves are seasonal and localized. Asian prices, for example, saw a similar jump last year but those didn’t spill over with an associated similar rise in Europe. Our expectation is that these prices will revert to more normal levels early next year when heating demand ebbs and supplies adjust. However, if prices stay high as they have been, this could begin to be a drag on global growth. Meanwhile, ripple effects are being felt in coal and oil markets. Brent crude oil prices, the global benchmark, recently reached a seven-year high above $85 per barrel, as more buyers sought alternatives for heating and power generation amid already tight supplies. Coal, the nearest substitute, is in high demand as power plants turn to it more. This has pushed prices to the highest level since 2001, driving a rise in European carbon emission permit costs.
A Hobbled Recovery Along Entrenched Fault Lines
The global recovery continues but momentum has weakened, hobbled by the pandemic. Fueled by the highly transmissible Delta variant, the recorded global COVID-19 death toll has risen close to 5 million and health risks abound, holding back a full return to normalcy. Pandemic outbreaks in critical links of global supply chains have resulted in longer than expected supply disruptions, feeding inflation in many countries. Overall, risks to economic prospects have increased and policy trade-offs have become more complex.
Inflation Scares in an Uncharted Recovery
The good news for policymakers is that long-term inflation expectations are well anchored, but economists still disagree about how enduring the upward pressure for prices will ultimately be. Some have said government stimulus may push unemployment rates low enough to boost wages and overheat economies, possibly de-anchoring expectations and resulting in a self-fulfilling inflation spiral. Others estimate that pressures will ultimately be transitory as a one-time surge in spending fades.
Five Lessons Evergrande Taught Us About The Chinese Economy
The Evergrande story is bigger than just one company. It’s about China’s unsustainable model of economic growth, which has relied on endless investment and a mad, debt-fueled development frenzy in recent years. That model helped China soar, but the country is now experiencing some turbulence. Last week, some alarmist observers were calling this China’s “Lehman moment” — a reference to the collapse of Lehman Brothers that preceded the 2008 financial crisis — but China-focused economists argue that’s overblown.
How Countries Can Diversify Their Exports
By looking beyond commodities, the research shows that economy-wide policies such as governance and education help foster diverse exports more than narrowly targeted industrial policies, a finding that can better guide nations aiming to expand their international trade. The examination of 201 countries and territories goes beyond the economic complexity indices that have traditionally been used by economists. Those proxies for the productive capability of a given economic system have strong sensitivity to commodities, which can distort their accuracy.
How to Tax in Asia’s Digital Age
Asia alone has roughly two billion internet users, with considerable room to grow. Asia’s advanced and emerging market economies have several locally headquartered tech giants—including Alibaba, JD.com, Tencent, Rakuten—and host foreign tech giants such as Facebook. A new set of agreed global tax reforms will change where these tech giants and other global giants pay taxes.
How the Pandemic Widened Global Current Account Balances
2020 was a year of extremes. Travel all but ceased for a period. Oil prices wildly fluctuated. Trade in medical products reached new heights. Household spending shifted to consumer goods rather than services and savings ballooned as people stayed home amid a global shutdown. In our latest External Sector Report we found that the global reaction to the pandemic further widened global current account balances—the sum of absolute deficits and surpluses among all countries—from 2.8 percent of world GDP in 2019 to 3.2 percent of GDP in 2020. Those balances are set to widen further as the pandemic continues to rage in much of the world.
Drawing Further Apart: Widening Gaps in the Global Recovery
The global economic recovery continues, but with a widening gap between advanced economies and many emerging market and developing economies. Our latest global growth forecast of 6 percent for 2021 is unchanged from the previous outlook, but the composition has changed. Growth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia. For 2022, we project global growth of 4.9 percent, up from our previous forecast of 4.4 percent. But again, underlying this is a sizeable upgrade for advanced economies, and a more modest one for emerging market and developing economies.
Sub-Saharan Africa: We need to act now
The growth of infections in sub-Saharan Africa is now the fastest in the world, with an explosive trajectory that is outpacing the record set in the second wave. At this pace, this new wave will likely surpass previous peaks in a matter of days—and in some countries, infections are already more than double, or even triple, their January peaks. The latest (delta) variant—reportedly 60 percent more transmissible than earlier variants—has been detected in 14 countries.

AGENCIES

Operational Lessons for COVID-19: What can we Learn from Past Outbreaks?
By JACOB BATHANTI and DEBRA LADNER / Image Credit: World Bank As COVID-19 (coronavirus) spreads around the world, governments and development organizations are thinking hard about how to respond effectively. Trajectories of the epidemic have varied widely among countries as governments adopt a range of policies to contain it. These efforts raise the question of what lessons we can glean from previous experiences in combating novel disease outbreaks. We examined four case studies of epidemic response and recovery from the Global Delivery Initiative (GDI): three from past outbreaks, and one new case: Building a more resilient health system after Ebola in Liberia Financial inclusion and resilience: How BRAC’s microfinance program recovered from the West Africa Ebola crisis How Nigeria’s Centre for Disease Control contained Lassa Fever, 2015-2017 (Forthcoming) The Republic of Korea’s First 70 Days of Responding to the COVID-19 Outbreak  GDI case studies trace the implementation of development interventions, focusing on delivery challenges (the non-technical problems that impede interventions from achieving their hoped-for results) and how practitioners address these obstacles. Examining implementation processes in context helps surface innovations to inspire practitioners facing similar challenges, since many delivery challenges recur across contexts and interventions. In the cases we analyzed, a host of delivery challenges emerged as practitioners raced to implement effective responses. What were the greatest challenges? Basic infrastructure. Shortfalls of basic health infrastructure and equipment hindered Nigeria’s response to the 2015 Lassa outbreak as well as Liberia’s response to Ebola in 2014. These ranged from too few ambulances to a lack of testing capacity (at one point, Liberia’s health authorities had to send samples to Guinea to test for Ebola). Coordination. Cooperation across a wide range of partners and stakeholders is crucial in epidemic situations. Yet such coordination can be difficult.  In Liberia, the government found that international partners sometimes followed their own playbooks instead of coordinating with each other and with the government. In Nigeria, the country’s federal system added a layer of complexity, as some state governments took their responses to Lassa more seriously than others.   Organizational capacity, communication and engagement. The Liberia and Nigeria case studies documented shortages of frontline staff and technical capacity of some teams, hindering response time and impeding surveillance. As it struggled to keep ongoing microfinance programs afloat in Liberia and Sierra Leone during the 2014 Ebola crisis, development partner BRAC relied on remote communications such as Skype with its in-country staff.  But communication with clients was more difficult. As a result, management sometimes had an incomplete picture of what was happening on the ground. Lessons and reflections What do these case studies tell us about tackling delivery challenges in an epidemic, and about creating resilient systems? We suggest four lessons that emerge from the cases 1. The importance of adaptive learning for effective responses. Learning from experience is crucial, both for effective emergency response and to rebuild for the future.  Korea’s response to an outbreak of Middle East Respiratory Syndrome (MERS) in 2015 was seen as slow and opaque, but lessons from this experience have informed its effective response to the COVID-19 outbreak. In Nigeria’s response to Lassa in 2015, the government moved quickly, spurred by memories of the recent Ebola epidemic. And Nigeria’s Centre for Disease Control (NCDC) examined past responses to Lassa fever outbreaks to improve its response through systematic learning. 2. Coordination is hard – but vital. Cooperation and coordination are urgently needed during epidemic responses. This includes coordination among government agencies, across countries, and with a host of development and international organizations. In Liberia during the Ebola outbreak, the government found it difficult to coordinate among the many stakeholders working to combat the disease. The challenges persisted even after the outbreak and impacted efforts to strengthen the health system. Coordination challenges can be mitigated when leaders use their convening power to bring key stakeholders together.  For example, the NCDC had authority to lead disease responses and coordinate among agencies. Korea’s government moved quickly to convene and work with the private sector to develop testing. 3. Effective public engagement is essential. Communication and transparency are crucial, because public behavior and trust can have profound impacts on epidemic response.  In Nigeria, a decentralized communications strategy empowered the NCDC to reach out to communities affected by Lassa fever using social media and WhatsApp. In Korea, leaders recognized the need for transparency to build trust after MERS. Communications on COVID-19 have been proactive, with regular online updates, text messages, and a massive new call center to answer questions from the public. 4. Investments in frontline workers – and systems to support them – are critical. In Liberia, health workers were overstretched even before Ebola. After the epidemic, the government trained new cadres of community health assistants, strengthened the disease surveillance system, and invested in testing capacity. By 2018, these investments were bearing fruit, enabling the government to respond more quickly to outbreaks including Lassa, monkeypox, and meningococcal disease. Similarly, BRAC found that supporting frontline staff throughout the Ebola crisis influenced its quick recovery in Liberia and Sierra Leone. The Global Delivery Initiative is a partnership of over 50 organizations focused on operational insights to better understand what works in implementation. Jacob Bathanti is an editor for the Future Development blog and Debra Ladner is Program Lead for the Global Delivery Initiative as well as Senior Knowledge Management Specialist of the World Bank.
Tracking Trade During the COVID-19 Pandemic
Most trade takes place by sea, and—for navigational safety purposes—virtually all cargo ships report their position, speed, and other information many times a day. A new IMF methodology using these data can help better inform us how international trade is affected by the COVID-19 pandemic.
The Great Lockdown Through a Global Lens
The Great Lockdown is expected to play out in three phases, first as countries enter the lockdown, then as they exit, and finally as they escape the lockdown when there is a medical solution to the pandemic. Many countries are now in the second phase, as they reopen, with early signs of recovery, but risks of second waves of infections and re-imposition of lockdowns. Surveying the economic landscape, the sheer scale and severity of the Global Lockdown are striking.
Reopening from the Great Lockdown: Uneven and Uncertain Recovery
Compared to the April World Economic Outlook forecast, the IMF now projects a deeper recession in 2020 and a slower recovery in 2021. Global output is projected to decline by -4.9 percent in 2020, 1.9 percentage points below our April forecast, followed by a partial recovery, with growth at 5.4 percent in 2021.
Digital Financial Inclusion in the Times of COVID-19
The COVID-19 pandemic could be a game changer for digital financial services. Low income households and small firms can benefit greatly from advances in mobile money, fintech services and online banking. Financial inclusion as a result of digital financial services can also boost economic growth. While the pandemic is set to increase use of these services, it has also posed challenges for the growth of the industry’s smaller players and highlighted unequal access to digital infrastructure. Several actions will need to be taken to ensure maximum inclusion going forward.
Teleworking is not Working for the Poor, the Young and the Women
The COVID-19 pandemic is devastating labor markets across the world. Tens of millions of workers lost their jobs, millions more out of the labor force altogether, and many occupations face an uncertain future. Social distancing measures threaten jobs requiring physical presence at the workplace or face-to-face interactions. Those unable to work remotely, unless deemed essential, face a significantly higher risk of reductions in hours or pay, temporary furloughs, or permanent layoffs. What types of jobs and workers are most at risk? Not surprisingly, the costs have fallen most heavily on those who are least able to bear them: the poor and the young in the lowest-paid jobs.
Fiscal Policies for a Transformed World
The ongoing COVID-19 pandemic has already prompted an unprecedented fiscal policy response of close to $11 trillion worldwide. But with confirmed cases and fatalities still rising fast, policymakers will have to keep the public health response their No. 1 priority while retaining supportive and flexible fiscal policies and preparing for transformational economic change.
New World Bank Country Classifications by Income Level: 2020-2021
It is important to emphasize that the World Bank’s income classifications use the GNI of the previous year (2019 in this case). Thus, the GNI numbers that are used for this year’s classification do not yet reflect the impact of COVID-19.
The Impact of COVID-19 (Coronavirus) on Global Poverty: Why Sub-Saharan Africa Might be the Region Hardest Hit
COVID-19 is taking its toll on the world, causing deaths, illnesses and economic despair. But how is the deadly virus impacting global poverty? Here we’ll argue that it is pushing about 40-60 million people into extreme poverty, with our best estimate being 49 million.