Nigeria Economic Outlook 2020 and Covid-19 Responses Prof. Joseph - - PowerPoint PPT Presentation

Nigeria Economic Outlook 2020 and Covid-19 Responses

• Prof. Joseph Nnanna, Chief Economist

Development Bank of Nigeria

qThe GDP in Nigeria has declined to -6.1% in Q2 2020 qUnemployment rose to 27.1 in Q2 2020 qInflation has been on the rise since the outbreak of Covid-19. It rose to 13.71% in September qProlonged weakness in the oil price has translated to further pressures on the exchange rate. qDevaluation

• f

the Naira

• Exchange

Rate has depreciated between 380-400. qBusinesses are facing difficulties in securing materials leading to a sharp rise in purchase costs, with companies passing these on in the form of higher

• utput prices.

qNigerians are being pushed into poverty as prices for goods are getting high.

Economic Outlook

Nigeria GDP Growth Rate

Nigeria Unemployment Rate

Nigeria Inflation Rate

q The Manufacturing PMI for Nigeria fell to 46.9 in September of 2020 from 48.5 in August, pointing to a 5th straight month of contraction in factory activity. q The Non-Manufacturing PMI for Nigeria sector fell to 41.9 in September of 2020 from 44.7 in August, pointing to the 6th straight month of contraction in the non-manufacturing sector.

Economic Outlook

Nigeria Manufacturing PMI Nigeria Non-Manufacturing PMI

Month Manufacturing PMI Non-Manufacturing PMI January 59.2 59.6 February 58.3 58.6 March 51.1 49.2 April No Data Available May 42.2 25.3 June 41.1 35.7 July 44.9 43.3 August 48.5 44.7 September 46.9 41.9

The Nigerian Economy: LEIs

Negative Positive No Change

Inflation Rose to 13.71 in September from13.22% in August Interest Rates Treasury Bills yields fall to 2.8% as of September 2020 Capital Importation Declined 78.6% in Q2 2020 compared to Q2 2019 and - 77.9% compared to Q1 of 2020 Public Debt Rose to N28.63 trillion as of Q1 2020 34.89% was external while 65.11% was domestic Exchange Rate Official exchange remained at 380/$ Parallel market depreciated to 455/$ as at September I&E rate remained at 386/$ as at September 8th, 2020 External Reserves Declined to 35.88billion as of July 2020 Oil price Brent Crude increased to $40.22pb as at September 2020 Oil Production Avg production fell to 1.81mbpd, GDP Growth Rate GDP grew by -6.10% (Y-O-Y) in Q2 2020 Unemployment Rose to 27.1 in Q2 of 2020 the highest on record up from 23.1% in Q3 2018

LEIs: Leading Economic Indicators Source: NBS, CBN

qLow accessibility to loans from financial institution qInsufficient capital qLow power supply qIndiscriminate tax levies qInability to keep proper financial record qPolicy inconsistencies qInsecurity

Main challenges faced by MSMEs

As a result of the pandemic, challenges faced by MSMEs have increased and this has led to lay-off of staff and shut down of businesses. Some of these businesses have diversified into making Covid-19 PPEs like face masks to take advantage of this need.

DBN Covid-19 Responses

Aim Develop a clear Economic Sustainability Plan in response to challenges posed by the COVID-19 Pandemic Problem Economic consequences Nigeria is facing due to the COVID-19 pandemic

• Oil revenue will drop from N669.9bn

monthly to N88.4bn.

• Unemployment rate which was 23.1% in

2018 is expected to rise to 33.6% in 2020 National Bureau of Statistics (NBS) projects that economic growth could fall by as much as -4.40% to -8.91% A stimulus package of N2.3 trillion was

• chosen. This amount will be funded by

N500bn from Special Accounts, N1.11 trillion

• f CBN structured lending and N302.9bn

from other funding sources. Proposed Key Projects

• A Mass Agricultural Programme
• Extensive Public Works and Road

Construction Programme

• Mass Housing Programme
• Strengthening the Social Safety Net
• Support for Micro, Small & Medium

Enterprises

The Federal Government, is set to commence nationwide implementation of two MSME initiatives namely; the MSME Survival Fund and the Payroll Support schemes, as the first to be rolled out (N60 billion) and then, the Guaranteed Offtake Scheme (N15billion). The Federal Government has disclosed that 174,574 persons have successfully registered for the N75bn MSME Survival fund and Guaranteed off-take stimulus schemes under the Nigeria Economic Sustainability Plan.

The Development Bank of Nigeria responded to the Covid-19 pandemic by providing:

• Moratorium (Principal and Interest) on Loans to PFIs for up to 6 months
• N100,000,000 million Grant to the Federal Government of Nigeria to cushion

the health crises of the pandemic

• Developed a long-term product (Long-term finance product)
• Increased Capacity Building to more MSMEs

DBN Covid-19 Responses

How Moroccan Economy and SMEs are facing the Covid-19 Crisis?

Abdelmoughite Abdelmoumen, Head of Strategy Caisse Centrale de Garantie, Morocco

• Morocco was severely hit by the effects of the Covid-19 crisis due to the drastic

sanitary measures adopted in Morocco and overseas (general lockdown, suspension of international travel and flights…)

• As Morocco is dependent on tourism, exports and FDIs for a considerable part of

its economy and due to the fall of internal demand and to unfavourable weather conditions leading to a less than average agricultural output, the Moroccan economy suffered from the most difficult crisis since the 1990s:

• GDP is expected to shrink by -5,8% in 2020 compared to a growth of 2,5% in 2019
• Budget deficit is expected to double in 2020 to reach -7,5%
• Treasury debt is expected to reach 76% of the GDP compared to 65% in 2019

Economic Outlook

• To overcome the crisis and to prepare for post-Covid relaunch, the Moroccan

Government, the banking & insurance sectors and the central bank have adopted many emergency initiatives targeting the private sector and households (special guarantees, moratoriums, lower interest working capital loans, grants…) which have had a great effect.

• Regarding the perspectives, the Moroccan Government is targeting a growth of

about 5% and a deficit of 6,5% in 2021. to achieve these goals, the FY 2021 budget will be based on the following measures:

üBoosting the expenses linked to social security, healthcare and education üReduction of unnecessary public sector expenses üInjecting more than 23 Billion USD in investments using a combination of PPP funds, credit loans and public sector investments üBoosting entrepreneurship and SMEs by increasing guarantee and funding offerings

Economic Outlook

• Many advances have been achieved in boosting Moroccan SMEs, especially during

recent years. Nevertheless, some major challenges are still preventing SMEs from fully ensuring their role as a growth engine:

üA high proportion of SMEs operate in the informal sector, especially micro and very small enterprises, which excludes them from tenders, credit, social security… üThe available funding offering, despite its wide scope, doesn’t perfectly address the needs of start-ups and less sophisticated micro enterprises üPayment delays are still a major headache for SMEs, especially those relying on public tenders and big corporations üSMEs are still less attractive for highly skilled workforce üSome modern sustainable development practices (green economy, social responsibility, governance) are difficult to implement by SMEs

Main challenges faced by SMEs

Economy of Japan and SMEs under COVID-19 Pandemic

Hikaru Fukanuma, Chief Research Fellow Japan Finance Corporation Research Institute

COVID-19: the First Wave = Mid April

• Government announced the State of Emergency and asked people to quarantine.

(April 16)

• The State of Emergency was cancelled. (May 25)
• GO TO TRAVEL campaign started (July 22)

> subsidy for hotel stay

COVID-19: the Second Wave = Mid August

• GO TO EAT campaign started (October 1) > subsidy for payment at restaurants

COVID-19 : pandemic is not so severe in Japan, currently

• New infected persons = about 500 / day : about 90,000 in total
• The number of deaths = less than 10 / day : about 1,600 in total

Economic Outlook

• People stopped goin out (shopping, eating, sports, etc.)
• Many companies started working remotely
• Tourism and business trips stopped from / to abroad and within Japan
• Sales of restaurants, retail shops, hotels, transportations decreased
• Income of people in such industries decreased; some are laid off

⇒28.1% GDP decrease per year in 2Q 2020 compared of 1Q

Government started a number of support measures for businesses and individuals

• JFC has made special loans for about 800,000 SMEs (over 25% of SMEs in Japan) , as

Government Finance Institution for SMEs.

• The largest disaster recovery loan in JFC history: double of the one for the 2011

Earthquake.

Economic Outlook

• Some indicator shows recovering of business and consumer sentiment

⇒12.6% GDP increase per year 3Q compared of 2Q expected

(by Japan Center for Economic Research)

⇒Sales DI recovered to - 56.5 in Aug. from - 79.5 in April (by JFCRI Survey)

Economy is certainly recovering but still not enough

• Demand for SMEs and income of SMEs has not recovered yet
• SMEs need to maintain jobs of employees and entrepreneurs themselves
• SMEs cash demand has peaked out = new special loans by JFC decreased

Uncertain future is the biggest problem

• Will the 3rd wave come?
• When will the economy, and the mood of the consumers, recover?
• When will tourism, from overseas and within Japan, recover?

We are hoping to host the Tokyo Olympics & Paralympics !

Main challenges faced by SMEs

French SMEs: Managing a Second Wave of Uncertainty

Baptiste Thornary, Head of Macroeconomic Research, Bpifrance

Economic Outlook

80 85 90 95 100 105

T4 T1 T2 T3 T4 T1 T2 T3 T4 2019 2020 2021

You Are Here

GDP, France

100 = 2019 Q4 Lockdown

March 17st – May 11th

New targeted measures

Curfew 6 weeks

Forecast

Main challenges faced by SMEs

• Main challenges:
• Managing the short term
• Managing the long term
• Access to the appropriate financing

instruments will be key

13% 17% 29% 38% 58% 45%

Hiring Investment

Cancelled Postponed Maintained

French SMEs, hiring/investment expectations sept 2020

Source : Bpifrance-Rexecode SME Survey, sept 2020

Finland´s recovery: how and when?

Timo Lindholm, Chief Economist Finnvera

Economic Outlook

• 8
• 6
• 4
• 2

2 4 6 8 00 02 04 06 08 10 12 14 16 18 20 22

GDP growth in Finland

%

70 80 90 100 110 120 130

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

New orders in manufacturing

Index: 2015 = 100

Prior to current crisis the Finnish economy experienced a ”lost decade” GDP development during Q2/2020 was better than in many other countries Worth to note: we will not see a traditional recovery ”back to normal” Productivity and investment tend to decrease after severe economic downturns Forecasts for GDP growth in 2021-2022: not rapid enough and not granted Our strength: ability to adapt digital solutions in business and public services The role of economic policy: help SME´s to survive, but how to boost growth and renew of economy in a clever and most efficient way?

Economic Outlook

Finnish SME´s will face a demanding task to renew their business Economic crises tend to accelerate innovation and reshape competition A more service-oriented economy will increase the export potential of SME´s Strengths: high level of education, solid financial sector, well-functioning economy Weakness: lack of medium-size (and small), strongly growth oriented companies The role of Finnvera is becoming even more important when boosting the recovery

Main challenges faced by MSMEs

Belgium

Pierre Léonard, Director of the Private Equity Department, SOWALFIN Group

• 3.649 hospitalization (+ 375)
• 573 intensive care (+ 48)

As of Monday, non-urgent care must be cancelled, for a period of 4 weeks. Main measures until November 19

• In the French community, curfew from 10 p.m. to 6 a.m.
• Homeworking is the rule
• Closure of the HORECA sector

…

Epidemiological situation October 24, 2020

• Main indicators : GDP : - 7,4% - Public deficit : -11,4%
• Decline in business turnover : - 35% (04) / - 14% (09)
• Events:
• 80%
• HORECA :
• 40%
• Youth unemployment (under 25) : + 10%
• Temporary unemployment : 1.2 million (04) / 308 thousand (08)
• Self-employed helped: 400 thousand (04) / 80 thousand (09)
• Very important bankruptcy prospects
• Direct Governmental grants to company : € 780 millions
• SOWALFIN group : € 150 millions guarantee - € 192 millions new funding

Economic Outlook

• Confidence in a growing GDP in 2021 (+ 6.4%)
• Return of confidence:
• entrepreneurs (- 8.5%)
• consumers (-17%)
• Reinstatement of demand
• Release of precautionary savings
• Maintaining corporate solvency

Main challenges faced by SMEs

United Kingdom

Matt Adey, Direct of Economics British Business Bank

Brazil: crisis, V shape recovery and uncertainties

Fabio Giambiagi, Chief Economist Banco Nacional de Desenvolvimento Econômico e Social

Economic Outlook Activity

Economic Outlook - Labor Market

Main challenges faced by SMEs

• Growth of 18,5% in the

credit to MSMEs.

• Support Program for Micro

& Small-Sized Enterprises (Pronampe) & Emergency Credit Access Program (PEAC-FGI).

Mexico's economic outlook and challenges for SMEs in the face of the effects of COVID-19

Armando Gamboa, Head of Financial Markets Analysis, Nacional Financiera

• COVID-19 short count as
• f October 21st
• Infected people: 874,171
• Death toll: 87,894
• Recently, confirmed cases

have increased but deaths have been low and stable.

• The second wave has not

arrived yet; authorities are vigilant.

• There are pleas to

reinforce the preventive measures.

Economic Outlook

• Returning to a “new normality”
• Reopening has been based on a traffic light

system.

• Activities are classified as essential and

nonessential.

• Main Economic Indicators
• GDP. Growth is expected in Q3 and Q4. GDP could

fall around 9% in 2020. The recovery expectations for the following years is slow.

• Employment. More than 7.5 million

jobs were lost in Apr-Sep. The unemployment rate increased to over 5% and is expected to end the year at 5.2%. For 2021 the forecast is 5.8%.

• Inflation. Annual inflation was 4% in
• September. By the end of 2020, the

estimate is 3.90%. For 2021 an inflation of 3.50% is expected. Food and traded goods prices have been the drivers.

• Monetary Policy. The key interest rate is

4.25%; another 25 bp cut is expected between Nov-20 and Mar-21.

• Exchange Rate. Thus far, during 2020,

the peso has depreciated by 9.30%. At the end of last week the peso was quoted at 20.87. By the end of 2020, the peso is forecasted to be at 22 MXN/USD. For 2021, the peso is forecasted to close at the same range.

• External inflows and outflows.

Foreign investors have withdrawn nearly USD 15 billion from the government debt market during the

• year. Their market share has been

reduced from 28% to 22%.

• Remittances have increased by 8.8%

through August, accumulating more than USD 29.5 billion. We are expecting an influx close to USD 40 billion by the end of the year, equal to

• approx. 3% of GDP.
• Poverty. A serious consequence of

the economic impacts of COVID is the increase in poverty. Different studies estimate that around 10 million people will fall below the poverty line this year.

Economic Outlook

• Main challenges
• Survival
• Demand reduction
• Client relationships
• Costs of reopening
• Lower use of installed capacity
• Workspace redesign due to

hygiene measures

• Introduction of new technologies
• Restoring supply chains
• Liquidity management
• Financing and debt restructuring
• Employee health and retention
• How are we facing them?
• Financial offerings:
• Regulatory modifications: loan restructuring policies, loan

term extension and interest rate reduction.

• Strengthening of financing channels in order to provide

temporary liquidity required by SMEs to respond to immediate commitments, such as payments to suppliers, facility maintenance and operation resumption.

• Loan guarantees focusing on strategic sectors to

encourage lending to SMEs, mainly for working capital and investment projects.

• Non-financial offerings:
• Training and technical assistance programs, focused on

providing SMEs with tools and specialized content on risk prevention and best business practices for their recovery.

Main challenges faced by SMEs

Canada: Economic Outlook

Pierre Cléroux, Vice President, Research and Chief Economist, Business Development Bank of Canada

80 85 90 95 100 02/01 03/01 04/01 05/01 06/01 07/01 08/01 09/01

Employment level in % of February level

Employment in Canada is recovering faster than in the US

96%

Canada

93%

USA

September 2020

SOURCE: Statistics Canada and US bureau of Labor Statistics.

Economic Outlook

BDC

à Co-Lending Program (BCAP) in partnership with Canadian FIs à Working Capital Loan (<$2M) à Mezzanine Fund (<$60M) à VC Bridge Financing (<$3M) à Advisory Support

Grants and subsidies

Federal Government

à Tax deferrals à Wage subsidy à Rent reduction for small businesses à Canada Emergency Business Account – $40K interest free loan

EDC

à EDC & BDC are working together to deploy the Business Credit Availability Program (BCAP) à Loan Guarantee Program

à Practical advice to guide the recovery à Covid-19 Planning Toolkit (Free) and Resource Guide (Free)

Commercial lending

COVID-19 support programs for SMEs

• 1. Many Canadians plan to spend less in the medium-term

1 in 4 consumers wants to reduce personal consumption

• 2. They will spend more online

32% of Canadians are planning to spend more online

• 3. Canadians plan on buying more local

83% of consumers are willing to pay more for local products

• 4. Health remains the main concern

50% of Canadians are concerned about health impacts when making purchasing decisions

Canadian consumers adopt new behaviours

SOURCE: BDC consumer survey, May and June 2020 n=2,000

Economic Outlook

• 2
• 1

1

• 32
• 10
• 9

July 2019 October 2019 january 2020 April 2020 July 2020 Oct-20

October 2019 January 2020

Investment intentions remain low except in technology

BASE: All respondents (n=1,000). Respondents who did not know or preferred not to answer were excluded from the calculation base. Over the next 12 months, what do you expect your company’s investment spending to be?

Indicator of Investment Intentions (balance of opinion)

April 2020 July 2019 July 2020 October 2020

25%

• f entrepreneurs plan

to invest in new technologies

Economic Outlook

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