President Muhammadu Buhari has summoned an urgent meeting this afternoon with his economic advisory council chaired by the leading economist Doyin Salami and which also has former governor of the central bank, Charles Soludo as member.
Today’s meeting will hold behind the backdrop of oil, Nigeria’s main revenue and foreign currency earner, crashing below $30 a barrel for the first time since 2016. Brent crude, the international benchmark, was trading at $29.65 a barrel as at 11am Tuesday.
That’s about half the $57 benchmark oil price for the 2020 federal government. Traders say prices could fall even lower under the weight of a fierce price war orchestrated by Saudi Arabia.
Senior government officials in Abuja said the president is also expecting the report of the ministerial team led by the minister of finance which was asked to recommend ways of salvaging the 10-week old 2020 budget and mitigate the adverse effect of the Coronavirus on the Nigerian economy.
As winds of a severe economic meltdown swirl around the world, leaders have come under intense pressure to strengthen national economies and offer relief to their people. But Nigeria appears to face an even more severe fallout given that its economic buffers are hugely depleted.
“Nigeria’s economic buffers are non-existent or at best very weak”, says economist Keith Halloway, a senior researcher and investment analyst at London based Brentworth Research. “So the Nigerian economy is far more vulnerable today than what you will find elsewhere.
“The solution to the problem in Nigeria will require significant reform of the economy to allow the country tap into the massive liquidity out there in the world. This cannot happen with the perception investors have of the way Nigeria headed and also how the country manages its currency.”
Take for instance, South Africa has a war chest of about $150bn which it can call upon to fight the impact of the Coronavirus outbreak, including its $130bn rated Public Investment Corporation and another near $20bn in the country’s unemployment fund. In the case of Nigeria there is not much that it can call on with its excess crude account depleted to a paltry $71.8 million today.
“There’s no better time than now for the government to implement reforms that will bring private capital to the table, seeing that we don’t have the buffers to weather a storm,” said Kyari Bukar, co-founder and managing partner of private equity fund, Trans Sahara Investment Corporation.
On Monday the central bank announced a six-point response to the crisis but it is unclear if the president will now order more far reaching measures to save Nigeria from another economic recession or help reduce the pain of one if it comes.
Ahead of Tuesday’s market open in the US, equity futures reversed an advance while European stocks have dropped as investors struggled to find their feet after the biggest plunge on Wall Street since 1987. Treasuries fell alongside the yen and gold.
The Stoxx Europe 600 Index opened in the green Tuesday after its lowest close in almost seven years, but it couldn’t hold the move and turned lower. Asia also saw a volatile session, with Australian equities posting their biggest jump since 1997 while benchmarks in Hong Kong and China saw more muted moves.
The yield on 10-year Treasuries rose after plummeting almost a quarter percentage point Monday. The dollar strengthened against all its major counterparts except the South African rand.
Here are the main moves in markets around the world Tuesday:
Stocks
- Futures on the S&P 500 Index decreased 0.5% as of 9:31 a.m. London time.
- The Stoxx Europe 600 Index dipped 2.3%.
- The MSCI Asia Pacific Index rose 0.1%.
Currencies
- The Bloomberg Dollar Spot Index climbed 0.5%.
- The euro decreased 0.6% to $1.1111.
- The British pound dipped 0.7% to $1.2187.
- The Japanese yen declined 0.7% to 106.57 per dollar.
Bonds
- The yield on 10-year Treasuries climbed seven basis points to 0.79%.
- Germany’s 10-year yield rose three basis points to -0.43%.
- Britain’s 10-year yield gained 49 basis points to 0.493%.
