04 Apr

Daily Watch – Petrol subsidy returns, IMF projects further fall in forex reserves

  • In recent days, the open market price of petrol has risen to N92.34. However, the federal government has returned to petroleum subsidy, as it insists on retaining the current price. According to the PPPRA, Nigeria started to pay N5.84 on every litre of petrol sold from April 1, 2016. The template also revealed that on every metric tonne of petrol, Nigeria will pay a subsidy of at least N7,824.84. With a consumption level of at least 33 million litres per day, the subsidy would cost N5.782 billion in April alone – if the template remains unchanged. Though the federal government never really removed the subsidy, it didn’t have to pay it based on the global prices of crude oil in the first quarter of the year.
  • The IMF says Nigeria’s GDP will be worse in 2016 than it was in 2015, despite plunging to a record low in 2015, projecting a GDP growth of 2.3 percent in 2016 – lowest since democracy returned in 1999. IMF said though “the non-oil sector accounts for 90 percent of GDP, the oil sector plays a central role in the economy. Lower oil prices have significantly affected the fiscal and external accounts, decimating government revenues to just 7.8 percent of GDP and resulting in the doubling of the general government deficit to about 3.7 percent of GDP in 2015.” The IMF also projected that Nigeria’s foreign exchange reserve, currently fluctuating at an 11-year-low, would fall further to new lows at about $21.5 billion before the end of the 2016 fiscal year. Reduced foreign capital inflows, petrol shorteages, and lower investor confidence would have the effect of “weakening corporate balance sheets, lowering the resilience of the banking system, and likely reversing progress in reducing unemployment and poverty”.
  • The recruitment of ten thousand policemen by the police service commission began nationwide last Friday. President Buhari had last year at the National Security Summit in Abuja directed the force to recruit 10,000 Nigerians into the service to address the shortfall in the manpower needs of the police. The Police Service Commission Chairman, Mike Okiro, has said that N8.6 billion will be needed for the recruitment of 10,000 officers in the Nigerian Police Force.