Wednesday, July 6, 2016

Brexit impact on Nigeria

Brexit will be positive for Nigeria, according to Peter Kohli, the CEO of DMS Funds. In an article published in NASDAQ online, he explains that Britain, without Brussels will be able to make lucrative trade deals with the world and especially commonwealth countries, including Nigeria.

“In my humble opinion, Britain extricating itself from that pompous union will be a net positive for Nigeria,” he writes. “So whether or not Nigeria makes it economically is totally up to them. Recently, the Nigerian Central Bank abandoned the currency peg and allowed the Naira to sink or swim. There was initial optimism that the move would draw in foreign investors, but that optimism was short-lived. The spectre of a recession is beginning to loom larger, mainly, in my opinion, because the economy is not well diversified.”

According to Kohli, Nigeria’s GDP in the first quarter of 2016 came in at a negative 0.4% year-over-year. However, it actually contracted 13.7% quarter-over-quarter. Exports (mainly of oil and gas) were down 65% year-over-year from March 2016, and that of course robs the treasury of much needed revenue.

As for the current cost of producing a barrel of oil in Nigeria, it’s $31.60. But the breakeven price for that country is $141.70! “So something has to give. And don’t blame it on Brexit because that will have no adverse effect on the Nigerian economy,” writes Kohli.

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