Financial Derivatives CEO on how to mitigate the economic impact of COVID-19 in Nigeria

Since the COVID-19 pandemic, the IMF says it expects a 3.4 per cent economic contraction for Nigeria this year, while ratings agency Moody’s affirmed Nigeria’s B2 long-term issuer rating and senior unsecured rating and maintained a negative outlook for Nigeria. Bismarck Rewane, CEO of Financial Derivatives joins CNBC Africa for more.

Fri, 17 Apr 2020 12:20:38 GMT

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AI Generated Summary

Nigeria faces a 3.4% economic contraction due to the COVID-19 pandemic, highlighting the need for structural reforms to facilitate recovery.
Challenges to Nigeria's creditworthiness are attributed to the country's reliance on oil and declining revenues, calling for external balance adjustments.
Urgent interventions are required to address revenue shortfalls, inflation, interest rates, and external imbalances to ensure a stable economic future for Nigeria.

The economic landscape in Nigeria has been greatly impacted by the COVID-19 pandemic, with projections showing a 3.4% economic contraction for the country this year. In a recent interview on CNBC Africa, Bismarck Rewane, CEO of Financial Derivatives, shed light on the implications of the pandemic on Nigeria's economy. Rewane highlighted the vulnerability of Nigeria's economy due to its limited buffers compared to previous economic shocks. He emphasized the need for structural changes to facilitate a robust recovery and mitigate the impact of the recession. The CEO also addressed the concerns raised by rating agencies like Moody's regarding Nigeria's creditworthiness, attributing them to the country's dependence on oil and the sharp decline in oil revenues. Despite the challenges, Rewane expressed confidence in Nigeria's ability to overcome the crisis by implementing necessary measures. One of the key strategies being pursued by the government is to secure financial assistance from multilateral lenders such as the World Bank, the African Development Bank, and the IMF. However, the funding gap remains significant, requiring additional financing from domestic and other sources. The deteriorating terms of trade and trade balance further complicate the economic situation, calling for external balance adjustments. Rewane stressed the importance of realigning the currency to address exchange rate disparities and promote diversification. The impact of lockdown measures on Nigeria's informal economy was also discussed, with Rewane highlighting the vulnerability of daily wage earners and cash-dependent businesses. The CEO cautioned against the looming threat of social unrest resulting from economic hardships, urging the government to balance saving lives with protecting livelihoods. In light of the ongoing oil market turmoil, with Brent crude prices hovering around $20 per barrel, Rewane pointed out the significant revenue shortfall for Nigeria. The country's fiscal gap is expected to widen, necessitating urgent interventions to stabilize the economy. Rewane emphasized the need for decisive policy actions to address inflation, interest rates, and external imbalances. He expressed optimism that with strong leadership and bold decisions, Nigeria could pave the way for a gradual and sustainable economic recovery by 2021.