By Mathew Dadiya, Abuja

The International Monetary Fund (IMF) has cut down Nigeria’s 2020 Gross Domestic Product (GDP) growth projection, saying the economy will shrink by 5.4 per cent.

The IMF had in April 2020 projected that Nigeria’s economy would contract by 3.

The Fund announced the new forecast on Thursday in its overview of the World Economic Outlook for June, titled, ‘A crisis like no other, an uncertain recovery’, which was released on Wednesday.

According to the IMF, global growth is projected at –4.9 per cent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook forecast.

“The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.”

The report said for the first time, all regions were projected to experience negative growth in 2020.

It said there were, however, substantial differences across individual economies, reflecting the evolution of the pandemic and the effectiveness of containment strategies; variation in economic structure; reliance on external financial flows, including remittances; and pre-crisis growth trends.

Part of the report read, “In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1.0 per cent in 2020, supported in part by policy stimulus.

“India’s economy is projected to contract by 4.5 per cent following a longer period of lockdown and slower recovery than anticipated in April.”

According to the report, in Latin America, where most countries are still struggling to contain infections, the two largest economies, Brazil and Mexico, are projected to contract by 9.1 and 10.5 per cent, respectively, in 2020.

“The disruptions due to the pandemic, as well as significantly lower disposable income for oil exporters after the dramatic fuel price decline, imply sharp recessions in Russia (–6.6 per cent), Saudi Arabia (–6.8 per cent), and Nigeria (–5.4 per cent), while South Africa’s performance (–8.0 per cent) will be severely affected by the health crisis,” it said.

Forex Market Operators Express Concern Over Naira Rates Unification

By Joy Okeke, Lagos

Nigeria’s currency market operators are likely to suffer if the plans to unify the Naira around NAFEX rate is eventually implemented by the Central Bank of Nigeria.

Unification around the NAFEX rate of about N388 is effectively a devaluation from N360/$1. However, if the CBN supports this move with liquidity that matches demand from a reviving economy, then surely the days of the black market may just be numbered.

Victor Silas an Investment Analyst at a leading Nigerian financial institution explained that the recent drawdowns, being experienced at the black market will soon be a thing of the past. He said;

“With the drawdown in the FX reserves, the odds are against the naira. As the economy reopens and the resumption of dollars sells to BDCs and attempts to meet piling FX demands, we might start to see pressures on the currency.”

Recall that the Governor of the CBN, Godwin Emefiele had on Tuesday at an Investors Conference organized by Citibank confirmed the apex bank’s decision to unify the exchange rate in order to strengthen the Naira.

Emefiele said, ”the rates they are buying the dollar from the black market are unrealistic. He said: “The CBN has always maintained that the black market is not a good determinant of the value of the naira.

“You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets. But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.”

“We will continue to pursue unification around the NAFEX Market”, Emefiele said, noting that as at the end of 2019, Nigeria experienced a “relatively stable market because the NAFEX rate and rate that the Central Bank does transaction outside the NAFEX was close to themselves. At some point, the NAFEX rate may be below the Central Bank rate”

Speaking on the issue, a Forex dealer at one of the biggest banks in the country by assets, who craved anonymity said that the unification of the Naira’s exchange rates has already begun.

He said; “The unification has already commenced with the rate at which CBN sells funds for SME and payment for School fees, travelling allowance and medical payment is within the IEFX levels.

“As stated by the CBN Governor, the speculators in the Black market will lose money as soon as CBN begins selling to the BDCs and international flights starts. There’s also a need for the CBN to clamp down on speculators and round trippers in the market to stabilize rate which should not be more than c.$/N400”

This move in unifying the exchange rate system is also expected that the present converging rates estimated at N387 to $1 (I &E Window) will boost revenues for the Federal government which could see a gain of N20 on every US dollar earning in oil.

Market analysts believe the reluctance of the CBN to fund liquidity shortages at the I&E window is the reason why the black market has depreciated to about N460/$1. They claim legitimate transactions have already taken place in the parallel market especially for businesses who have obligations to meet but cannot access forex from official windows.

The naira was trading at N459 to $1 at the black market on Thursday, according to data obtained from Everdon BDC from the previous session of N455 to $1, recorded on Wednesday, a differential of N4.