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Sunday, 20th May 2018
3:30:54pm

Economy

Articles related to economy

Nigeria’s parliament passed a record 9.12 trillion naira ($29.8 billion) budget for 2018 on Wednesday aimed at boosting growth in west Africa’s biggest economy nine months before the country’s next presidential election.

Growth remains fragile after Africa’s top crude oil producer last year emerged from its first recession in 25 years. The recession was largely caused by low crude prices and militant attacks on energy facilities since oil sales make up two-thirds of government revenue.

The total sum laid out in the spending plan passed by the Senate is higher than the 8.6 trillion naira budget presented to parliament by President Muhammadu Buhari in November.

The budget was passed by the Senate, the upper chamber, and by lawmakers in the lower House of Representatives shortly afterwards. The budget still needs to be returned to Buhari to be signed into law.

“We must grow our economy away from oil. Hopefully, the current budget, when signed into law, should help us in this regard,” said Senate President Bukola Saraki.

Senate lawmakers said the increase from the plan presented by Buhari six months ago was due to the assumed oil price rising to $51 per barrel, up from $45 in Buhari’s earlier version.

The budget assumes crude oil production of 2.3 million barrels per day and an exchange rate of 305 naira per dollar. Brent crude stood at $78.43 per barrel by 1643 GMT. 

“We still consider the oil price benchmark to be rather conservative given this year’s oil price outlook and would have preferred to see a steeper hike accompanied by lower borrowing,” said Olalekan Olabode, an economist at Lagos investment firm Vetiva Capital.

The budget proposes the use of 2.2 trillion naira to service debts and would operate a deficit of 1.73 percent of gross domestic product this year.

Delays in passing budgets, amid wrangling between the executive and legislature, are common in Nigeria and hindered the implementation of Buhari’s previous spending plans.

Buhari, who took office in 2015, plans to seek a second term in next February’s election. His handling the economy is likely to be a major campaign issue.

Budgets under Buhari, who took office in May 2015, have been Nigeria’s largest ever. But economists say implementation has been poor and failed to provide the type of capital expenditure needed to improve infrastructure. 

“The implementation of fiscal policy is still weak and this year there is an additional risk of unproductive spending in the lead up to the election,” said Cobus de Hart, a senior economist at South Africa’s NKC African Economics.

-Reuters 

South Africa’s Reserve Bank will keep interest rates unchanged next week as an anticipated quicker rise in consumer prices over the coming months won’t drive inflation above target, a Reuters poll showed Wednesday. 

All 25 economists surveyed in the past week predicted the central bank will hold rates at 6.50 percent at its May 24 meeting, which will follow last month’s losses by the rand and renewed weakness on Tuesday. 

“They will probably hold steady, with the rand showing some vulnerability,” said Dennis Dykes, chief economist at Nedbank. “It illustrates the concerns that they have about the global situation.” However, he expected a reasonably neutral statement from Reserve Bank Governor Lesetja Kganyago.

The Bank cut its main interest rate to 6.50 percent in March, giving a boost to the economy, and is now expected to enter a prolonged period of inactivity, with no change forecast for the next 18 months at least.

“This current oil price is putting pressure on the inflation rate, especially if you consider the value-added tax (VAT) hike, we have seen the bottom or the best of inflation,” said Stanlib economist Kevin Lings.

In February the National Treasury announced a VAT increase for the first time in two decades, which could hurt consumer demand, to cap ballooning debt and close a large revenue shortfall.

“From here inflation will move higher, that obviously makes it more difficult to justify a rate cut,” Lings added. 

Still, the rate of increase in consumer prices is not expected to breach the top-end of the Reserve Bank’s 3-6 percent target during the forecast horizon.

Emerging market currencies, including the rand, have been under pressure in the past month from a strong dollar bolstered by the Federal Reserve’s decision to raise U.S. rates in March and its apparent disposition to do so again.

In April a Reuters poll predicted the Fed would raise rates three more times this year.

Still the rand is expected to recoup some of its April losses against the dollar in the next 12 months - provided domestic economic growth improves.

Growth forecasts for South Africa have improved to 1.8 percent from 1.3 percent at the start of the year, even though mining and manufacturing shrank in March due to lingering policy uncertainty and lukewarm demand. 

Growth for next year is expected to hit 2 percent.

-Reuters

South Africa’s rand was weaker early on Tuesday, hurt by a stronger dollar which benefited from rising U.S. bond yields.

At 0610 GMT, the rand traded at 12.4100 versus the dollar, 0.6 percent lower than its close on Monday.

The dollar index rose more than 0.2 percent against a basket of major currencies.

The rand slipped late on Monday after setting a three-week high against the dollar late last week.

The South African currency has been led by external factors in recent weeks, but market attention this week is focused on local unemployment and retail sales data. 

Unemployment figures for the first quarter are due out on Tuesday, with retail sales for March on Wednesday.

Investors will scrutinise the data for signs that an economic recovery has built momentum since President Cyril Ramaphosa’s election in February.

Government bonds were also weaker in early trade, with the yield on the benchmark instrument due in 2026 up 6 basis points to 8.400 percent. 

South Africa is scheduled to hold a bond auction later on Tuesday.

-Reuters

Zimbabwe’s public sector workers have rejected an improved salary offer of 15 percent from President Emmerson Mnangagwa’s government and want wages for the lowest paid employees to more than double, the main public sector union said on Tuesday.

The government agreed last week to raise salaries by 10 percent for the army, police and other civil servants from July, when Zimbabwe is expected to hold its first general election since Robert Mugabe left power last year.

Apex Council, the union which represents all government workers, said the government’s higher offer on Monday was still below the poverty datum line (PDL) used to assess whether a person is deemed poor.

Zimbabwe’s PDL is $591, while the lowest government worker earns $253 a month. 

The southern African nation already spends more than 90 percent of its national budget on salaries and pensions, but Mnangagwa is trying hard to curb strikes by public workers before the elections, whose date he is yet to announce.

The new president, who came to power following a de facto army coup against 94-year-old Mugabe in November, has already faced public sector anger when doctors and nurses went on strike in March and April. 

“We would like to urge the government to improve the salary of the lowest paid to PDL,” Apex Council chairperson Cecilia Alexander said. “We have not yet reached a deadlock. Dialogue is still ongoing,” Alexander added.

-Reuters 

Zimbabwe’s central bank has stopped local banks from trading or processing payments linked to cryptocurrencies like bitcoin, its governor said on Monday, but stopped short of banning local cryptocurrency trading exchanges.

In the southern African nation, those who trade in bitcoin say it offers rare protection as their bank deposits lose value almost by the day while others use it to fund family members studying abroad or purchase goods online.

On Golix.com, the largest of only two trading platforms for virtual currencies, bitcoin was trading at $12,400 on Monday.

Reserve Bank of Zimbabwe governor John Mangudya, however, said in a statement, the central bank had not licenced anyone to trade in virtual currencies and that dealers and investors did not have the protection of the law.

“The Reserve Bank has directed all banking institutions not to provide banking services to facilitate any person or entity in dealing with or settling virtual currencies,” Mangudya said.

“The nature of cryptocurrency transactions make them the currency of choice for money launderers and other criminals.” 

Prices of digital currencies such as bitcoin rocketed at the end of last year as retail investors across the globe scrambled to get a piece of the profits. That triggered regulatory warnings and threats to crack down on the market.

China, a major market, has shut down local cryptocurrency trading exchanges.

Officials from Golix and Styx24.com, Zimbabwe’s other trading platform could not immediately comment on the central bank decision.

An industry insider who follows the cryptocurrencies in Zimbabwe said the RBZ ban would affect settlements between exchanges but sales between individuals would not be impacted. 

“We can sit over a cup of coffee and transfer cryptos among ourselves. The entire logic of crypto is peer to peer transaction without trusted third parties,” said the insider, who declined to be named because he is not authorised to speak to the press.

-Reuters

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