WEF, IMF Predict Fresh Global Crisis In 6 Months, Nigeria’s Recovery Hope Dips

WEF, IMF Predict Fresh Global Crisis In 6 Months, Nigeria’s Recovery Hope Dips
  • Maritime sector risk high
  • India, China accounts for half global growth in 2023
  • IPMAN says fuel to sell for N750 per litre

With the world facing growing economic instability and political tensions, volatility in geo-economic and geopolitical relations between major economies are likely to result in global upheavals over the next six months, according to a new survey of the World Economic Forum’s(WEF) Chief Risks Officers (CRO) community.

This coming as the International Monetary Fund(IMF) has said that the world economy is expected to grow at less than 3 per cent this year, with India and China expected to account for half of global growth in 2023.

The managing director of IMF, Kristalina Georgieva said the period of slower economic activity will be prolonged, with the next five years witnessing less than 3 per cent growth, “our lowest medium-term growth forecast since 1990, and well below the average of 3.8 per cent from the past two decades,” she said.

Consequently, in Nigeria’s economic realities, studies have shown that a nation with a massive ocean, unfavourable shipping trade balance and exchange rate volatility may not record sustainable economic growth.

 MMS Plus reports that the nation’s transport and logistics industry is battling with the problem of achieving sustainable economic growth from maritime activities in the face of dominating imbalanced shipping volumes and volatile exchange rates. And the efforts to efficiently manage the shipping trade imbalance is complex due to the volatility in a country’s macroeconomic variables. It means that even with a favourable balance of shipping trade, a question about the effect of exchange rate volatility on sustainable economic growth remains.  .

Meanwhile, another factor that has sustained the volatility and distress signals in the sector and economy in general is the unstable fuel pump price.The Independent Petroleum Marketers Association of Nigeria (IPMAN) has indicated that the pump price of Premium Motor Spirit (PMS) may rise to about N750 per litre

Still on the global risks across economies, the CRO community comprises 40 risk professionals from a wide range of multinational companies, covering technology, financial services, healthcare, professional services and industrial manufacturing. Respondents to the survey identified macroeconomic indicators, pricing and supply disruptions of key raw materials, armed conflicts and regulatory changes as top concerns for organizations.

“CROs are facing a multitude of pressing concerns as they look to the remainder of 2023,” said Ellissa Cavaciuti-Wishart, Head of Global Risks Initiative, World Economic Forum. “Whilst continuing to grapple with rising costs and supply disruptions, organizations are increasingly faced with a number of ethical and societal risks, which are far more complex to navigate than regulatory compliance alone.”

More than 85% of CROs expect some level of continued volatility and economic and financial conditions within and across major economies.

Recent months have also seen a sharp increase in discussion of technology-related risks. CROs broadly agree that risk management is not keeping up with the rapid development and deployment of AI technologies, with 75% saying the use of AI technologies poses reputational risks to their organizations and 90% calling for an acceleration of regulation. Almost half of respondents agree with slowing or pausing development of these technologies until the associated risks are better understood.

IMF chief warned that a sharp slowdown in the world economy last year following the raging pandemic and Russia’s military invasion of Ukraine would continue this year.

 “Some momentum comes from emerging economies — Asia especially is a bright spot. India and China are expected to account for half of global growth in 2023. But others face a steeper climb,” she explained.

“After a strong recovery in 2021 came the severe shock of Russia’s war in Ukraine and its wide-ranging consequences — global growth in 2022 dropped by almost half, from 6.1 to 3.4 per cent,” Georgieva said.

Georgieva said slower growth would be a “severe blow,” making it even harder for low-income nations to catch up.

“Poverty and hunger could further increase, a dangerous trend that was started by the Covid crisis,” she explained.

Her comments come ahead of next week’s spring meetings of the IMF and the World Bank, where policy-makers will convene to discuss the global economy’s most pressing issues.

The annual gathering will take place as central banks around the world continue to raise interest rates to tame galloping inflation rates.

About 90 per cent of advanced economies are projected to see a decline in their growth rates this year, she said.

For low-income countries, higher borrowing costs come at a time of weakening demand for their exports, she said.

Georgieva added that while the global banking system had “come a long way” since the 2008 financial crisis, “concerns remain about vulnerabilities that may be hidden, not just at banks but also non-banks.“Now is not the time for complacency.”

The IPMAN national spokesperson, Chinedu Ukadike  who conveyed the fuel pump price in Abuja, pointed out that the Nigerian National Petroleum Company Limited (NNPCL) currently maintains its ex-depot price at N587.7. However, if the NNPCL adjusts its prices, “other marketers will do the same.”

Furthermore, IPMAN called on the government to implement strategies to prevent the naira from depreciating further.

Ukadike said, “There will be a 10 per cent increase because the dollar was N750, now is over N900 that is almost a 20% increase if you apply this, you should be talking about N750/ litre.

“Currently, the dollar rate at the parallel market as of today is N910 which also means that the landing cost of PMS will increase and the domestic price of PMS will also increase.

“People should understand that government is no longer subsidizing and there is no local production in Nigeria. Had there been local production, it can be able to cushion the effect of too many naira pursuing the dollar. It would have helped us and saved the naira.

“If the government does not do something drastically, before the end of this year, Naira may be close to N1,100 per dollar and this will be a serious inflation for Nigeria.”

The pump price of the product has increased twice since the Federal Government removed fuel subsidy, hence market forces are now allowed to determine prices.

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