SAT, 24 OCT, 2020-theGBJournal- Cordros Research now estimates that Nigeria’s GDP will contract by 6.91% y/y in Q4-20, translating to negative growth of 4.15% y/y in 2020FY (Previous forecast: -3.32% y/y). The projection comes on the back of nationwide protests by youths demanding an end to police brutality nationwide. It said the economic impact of the protest is likely to be more severe if the unrest and curfew persist beyond October.
Over the past three weeks, the front wheels of economic activities have been deflated due to the protests across the country against police brutality and the excesses of the Special Anti-Robbery Squad (SARS).
The reported cases of the protests being hijacked by the hoodlums have forced some state governments to impose curfews to douse the tension and restore law and order. Destruction of public properties that ensued during the curfews has raised concerns about the possibility of prolonged curfews to return normalcy in the country.
This has added pressure to the slow recovery process predicated on the persistent FX liquidity constraints, improved compliance with OPEC oil production cuts, and general low level of business activities.
Meanwhile, Cordros in its Weekly Economic and Market report Friday noted that the Dwindling revenue since the onset of the COVID-19 pandemic has continued to affect the Federal Government’s (FGN) fiscal operations. At NGN2.52 trillion, total FGN revenue (excluding GOEs) for 8M-20, was 70.4% of the prorated target (NGN3.58 trillion), and 46.9% of the expected total revenue (NGN5.34 trillion) for 2020FY.
The underperformance comes despite the improvement in average oil prices (USD38.64/bbl) above the projected oil price (USD28.00/bbl) in the revised budget, increased daily average crude oil production (1.88mb/d compared to the expected production of 1.80mb/d in the revised budget), and the two-stage devaluation of the local currency in the official window, all of which implies higher federal oil receipts.
‘’With improved oil receipts not offsetting the decline in non-oil receipts, we believe government revenue will remain challenged over the rest of the year. Accordingly, we expect the weak revenue profile to constrain fiscal spending, potentially leaving a wider fiscal deficit to be financed by borrowings.’’