Global remittances are forecast to decline by about 20% this year as the economic crisis caused by the coronavirus pandemic shuts down business activity, the World Bank says.
This is the sharpest decline on record for what has become a lifeline for many people in Africa and elsewhere.
Migrant workers will not send as much money home because their employment and pay is vulnerable.
Globally money sent home by workers abroad to low and middle-income countries is forecast to fall by about $445bn (£360bn).
The decline for sub-Saharan Africa is predicted to be 23% and amount to $37bn this year.
The World Bank report also highlights how the cost of sending money to the region is about a third more expensive than the global average.
The average commission charged for sending $200 is 9%, but for southern Africa it can cost as much as 20%.
ECOWAS leaders have appointed President Muhammadu Buhari Champion of the COVID-19 response.
The appointment was made Thursday at the Extraordinary ECOWAS Summit on COVID-19 which was held via teleconferencing under the Chairmanship of Mahamadou Issoufou, President of the Republic of Niger.
During the teleconference, President Buhari called on fellow ECOWAS leaders to look beyond the challenges posed by the COVID -19 pandemic and tap into various opportunities that it presents for the betterment of lives in Member States:
“In every challenging situation such as the current one, there are also opportunities. Our region must therefore seek to find those opportunities provided by this gloomy global outlook for its benefit by embarking on the implementation of such critical policies, which before now, will be difficult to accept”
While calling on his colleagues to intensify collaboration in order to save the region from “this deadly pandemic through sharing our experiences and best practices,” President Buhari outlined some measures taken by his government in response to the pandemic. These are:
* The reduction of interest rates on all applicable Central Bank of Nigeria (CBN) interventions from 9 to 5 percent and introduction of a one- year moratorium on CBN intervention facilities;
*The inauguration of Presidential Task Force to coordinate national efforts to combat the spread of the virus and ensure efficiency and effectiveness in line with the Nigerian Action Plan on Health Security;
*The provision of relief materials including medical and food supplies as well as conditional cash transfers of N20, 000 each for poor and vulnerable households and ;
*The establishment of more isolation centers and testing facilities to contain the spread of the virus.
The Nigerian leader also said that unprecedented economic uncertainties, including severe fiscal and foreign exchange constraints, amid a slowdown in global economic growth that most nations are grappling with, have made it imperative for “our sub-region to refocus on accelerating the implementation of our popular vision of ‘ECOWAS of the people’ by adopting dynamic regional policies aimed at providing relief to our citizens.”
“Despite declining revenues, government continues to spend massively on the containment of the virus, medical care for those infected and minimizing impact of the crisis on the poor and vulnerable. This situation puts severe pressure on our finances by increasing our expenditures amid dwindling revenues. This invariably has led to a restructuring and reduction of our budget,” he added.
President Buhari used the occasion to rally other leaders to embrace agriculture, technology and innovation in order to emerge stronger.
“It is imperative that while addressing short term challenges, we should also explore opportunities to promote strong and dynamic agricultural policies that will guarantee food security for our people, creating jobs and reducing poverty in the region. We must innovate and use technology to boost the digital economy and do things differently, but better,” he said.
The Nigerian President affirmed Nigeria’s solidarity with other member states as they battle the virus:
“At a time of global uncertainty such as this, caused by the devastating impact of the COVID-19, let me convey Nigeria’s solidarity with all the Member States as we collectively battle to defeat the pandemic. I am greatly saddened by loss of numerous lives and extend my heartfelt condolences to families of those who have lost loved ones throughout the region. I also wish infected victims speedy and full recovery.”
He reiterated Nigeria’s commitment to the well-being and safety of the people in the sub-region and restated support for any initiatives that would curb the spread of the pandemic arising from the Summit.
European football governing body, UEFA has postponed the 2021 Women’s European Championship due to the disruptions caused by the coronavirus pandemic.
The tournament, which was billed for July 7 to August 1, 2021, will now take place from July 6 to 31, 2022.
The move followed the postponement of both the men’s European Championship and the Tokyo Olympics from 2021 until 2021.
The plans to use the same venues in host nation England that were originally proposed are however still intact.
The Nigerian National Petroleum Corporation (NNPC) has said the country might have to halt the production of oil if the prices of oil continued to fall consistently.
Brent, the benchmark against which Nigeria’s oil grades are priced, plunged by $6.34 to $19.23 per barrel on Tuesday amidst falling demand and an unprecedented glut in the global market that is causing storage to fill up quickly.
Kennie Obateru, the Group General Manager, Group Public Affairs Department, NNPC said Wednesday that even though Nigeria had not stopped oil production, there was a possibility it could.
“If the situation persists, it is something that is bound to happen definitely.
“We can’t keep producing if there is no market to sell to. And it is not something that is peculiar to Nigeria. It is a global thing.
“However, it has not happened. For as much as I know and up till this morning, nothing of such has happened.”
The NNPC top executive noted that stakeholders had to decide before on the way forward before a halt in production could happen.
“We should be positive and hope that things improve. But again, if the situation persists, definitely I think it will come to that.
“However, if it is being considered, then they will have to work out the modalities and details. But I can tell you that it (production halt) has not happened,” Mr Obateru said.
He stated that halting oil production could not be carried out without adequate preparation, adding that crude oil wells produce the gas Nigeria uses for power generation.
Obateru recommended that the country consider how to get the best out of Nigeria’s difficulty in finding buyers for its crude.
Earlier this month, Mele Kyari, the NNPC chief stated that Nigerian oil grades were not rejected even though they were stranded in the market.
Kyari said the 50 cargoes of Nigerian crude that were stranded in March had reduced in number.
“I am happy to announce that that number has gone down substantially. I don’t have the exact number for today, but it is now less than 20.”
News reported on Wednesday that at least three dozen cargoes of April and May-loading Nigerian crude, which are unlikely to be absorbed by the refining systems of oil majors, were striving to attract buyers on Tuesday ahead of the imminent June programmes.
Government had in March reviewed its benchmark for this year’s budget downward from $57 per barrel to $30.
We have just witnessed an oil price crash like never before taking prices of West Texas Intermediate into deeply negative territory.
The spot price of West Texas, the US benchmark, reached minus US$40.32 a barrel and the May futures price (which is deliverable in a physical form) went to minus US$37.63 a barrel, the lowest price in the history of oil futures contracts.
There has been no better indicator of the extent of the economic impacts of coronavirus. With borders closed and much of the world’s population being urged to stay at home, transport has come to a near halt.
How can a price turn negative?
The industry has not been able to slow production fast enough to counter the drop in demand. The other mechanism that normally stabilises prices, US oil storage, appears to be nearing capacity.
West Texas Intermediate is typically stored at the Cushing facility in Oklahoma which is on the way to being full.
Cushing is said to be able to hold 62 million barrels of oil – enough to fill all the tanks of half the cars in United States.
That’s why prices have gone negative. Traders with contracts to take delivery of oil in May fear they won’t be able to store it. They are willing to pay not to have to take it and have nowhere to put it.
Not all oil contracts went negative. West Texas Intermediate contracts for June and subsequent months are still positive, reflecting a feeling that the supply and demand imbalance will soon be corrected.
Brent, the international price benchmark, remained positive, dropping to US$25.57 – a fall of about 9%. Unlike West Texas Intermediate, Brent deliveries can be put on ships and transported to storage facilities anywhere in the world.
Not confined to the US
There is no guarantee the problems of storage evident in the US won’t spread to other markets.
This is despite the decision of OPEC-Plus (the mainly Middle Eastern member of the Organisation of the Petroleum Exporting Countries plus Russia and other former Soviet states) to respond to the free fall by cutting output by 9.7 million barrels per day, ending the recent duel over production levels between OPEC and Russia.
Adding another element to the COVID-19 story, on March 9, the day of the Black Monday stock market crash, the Chicago Mercantile Exchange reported a new daily record for West Texas Intermediate trading, reaching 4.8 million contracts, surpassing the 4.3 million recorded on September 2019 following the drone attacks on Saudi oil facilities.
The future does not look good. With rising unemployment, stuttering economies, and collapsing financial markets the prospects for substantial recovery in the oil markets seems far away.
The US, these days an exporter itself through shale oil, will suffer in the same way as traditional exporters in the Middle East.
Historically, oil markets have been considered good at predicting recessions, although in this case the causation might go the other way.
At this point the industry might be starting to consider that the best place to store oil is a natural one – leaving it in the ground.
Air Mauritius has entered voluntary administration after coronavirus-related disruptions made it impossible for the airline to meet its financial obligations for the foreseeable future, its board said on Wednesday.
Airlines around the world have been forced to ground their planes after governments imposed travel restrictions and locked borders to slow the spread of the COVID-19 pandemic.
The 52-year old carrier, which ferries 1.7 million passengers a year to 22 destinations across four continents, said the pandemic had struck just as the company was seeking to change its business model to address existing financial problems.
A. Sattar Hajee Abdoula and Arvindsingh K. Gokhool, have been appointed as administrators, the Air Mauritius board said in a statement.
Other airlines have suffered a similar fate, with Virgin Australia (VAH.AX) and South Africa Airways having called in administrators.
The sale of used clothing is a billion-dollar global industry. According to some estimates, almost 70% of garments that are donated globally end up on the African continent.
This happens through a complex global supply chain, where donated items that cannot be sold in thrift shops in high-income countries are resold in bulk to commercial textile recyclers. The garments are then sent to sorting centres, often located in the Middle East or Eastern Europe. These are then graded and sorted into bales. The bales are in turn resold to wholesalers on the African continent.
East Africa alone imports over $150 million worth of used clothes and shoes, largely from the US and Europe. In 2017, USAID estimated that the industry employed 355,000 people and generated $230 million in government revenue. It also supported the livelihoods of an additional 1.4 million in the East Africa Community bloc.
But scholars have also highlighted the complexities of this billion-dollar industry and how these commodity chains perpetuate poverty. This has led to a pushback. In 2016, the leaders of Rwanda, Uganda, Tanzania and Burundi issued a communiqué outlining a major tariff increase on imported used clothing. The plan was to ban all imports of used clothing by 2019. But the international trade disputes that followed led most countries to back out from implementing the ban.
The pushback rested on two broad sets of arguments. First, there is a widespread belief that the popularity of used clothing contributed to the collapse of the domestic textile industry in many parts of Africa in the 1980s and 1990s. Second, the continued use of used clothing is portrayed as undignified and eroding African pride.
Nevertheless, used clothing continues to enjoy unrivalled popularity in many countries. We sought to establish why by studying the phenomenon in Malawi, where used clothes are known as “kaunjika” (meaning “clothes sold in a heap”). It is a popular and resilient business.
We found that there were important economic and social pull factors behind the popularity of used clothing. We also found little support for the viewpoint that wearing used clothing is an attack on the dignity of African citizens.
The pull factors
Between March 2018 and February 2020, we visited local markets and shopping malls and interacted extensively with street vendors, shop keepers, wholesalers and consumers in Blantyre, Limbe, Zomba and Lilongwe.
Our goal was to better understand the widespread popularity of used clothing in Malawi. We were able to identify a number of common factors.
Quality: Used clothes and shoes sourced from high-income countries were considered to be of far better quality than brand new items available in local markets. Customers were often willing to pay a higher price for used merchandise than comparable new items.
Clothing labels indicating where items were produced were viewed as less important than the source of the donation. For example, kaunjika sourced from China was popular with vendors and customers because of sizes and styles that were more compatible with local preferences. Many vendors also claimed that when compared to clothing produced in China for African markets, clothing that had been produced for the Chinese themselves or for Western markets was of better quality.
Affordability: Many Malawians cannot afford even the cheapest new garments sold in local stores. Used clothing can be sold at higher prices than new items, mostly to middle income consumers in urban areas. But items that are not considered to be of good quality or style continue to trickle down the supply chain. These items are then sold by vendors operating in more rural areas where consumers with lower purchasing power have even fewer alternatives.
Fashion trends: Malawian consumers cited fashion trends and the “uniqueness” of imported used clothing as important factors for buying kaunjika. This was particularly the case for the younger generation who had been exposed to international trends and popular culture through social media. People crave “the latest fashion” often not available in the local retail stores.
Low start-up costs: The buy-in costs for local vendors of used clothing were very low. This created economic opportunities in the informal economy for groups with limited resources to access start-up capital. Several vendors told us that despite starting their businesses with limited funds, they had gradually been able to expand their operations and create employment opportunities.
And although the informal sector is characterised by numerous challenges – poor working conditions, lack of social protection, child labour and loss of tax revenue, to name a few – kaunjika appeared to offer a much needed way for many to earn a living.
Used clothing and sustainability
A recent report predicts that the global second-hand clothing market is set to double to $51 billion in the next five years, exceeding fast fashion within a decade.
It is still too early to tell how changing consumption patterns in high-income countries will affect used clothing markets around the world. But what appears certain is that the Malawian consumer, like many on the African continent, will continue to demand access to the same quality, styles and brands as the rest of the world, even if it means buying used clothes “sold in a heap”.