Analysts at FocusEconomics have said the Nigerian economy is seen gaining steam this year on the back of higher Oil prices and improved Foreign Exchange liquidity. The analysts stated this in a new report, ‘FocusEconomics Consensus Forecast Sub-Saharan Africa’ for July.
They, however, said political uncertainty ahead of next year’s elections and security concerns in the Niger Delta continued to pose risks to the growth outlook. “FocusEconomics panelists expect Gross Domestic Product to increase by 2.5 per cent in 2018, which is down a notch from last year’s projection. Next year, growth is seen rising moderately to 2.9 per cent,” the analysts said.
The report noted that the nation’s recovery stalled at the start of 2018, with growth inching down after hitting a two-year high in the fourth quarter of last year. “A weak performance by the non-oil sector drove the slowdown, as fuel shortages and slower growth in the agricultural and services sectors weighed on activity. However, a stronger expansion in the oil sector helped offset the sluggish non-oil economy in Q1,” the analysts said.
According to the report, more recent economic data suggest that the economy is regaining some lost momentum in the second quarter, as the Purchasing Managers Index hit a new record high in May, and oil prices remained firm in April and May.
“That said, the long-delayed implementation of the budget for 2018 will hinder the legislation’s boost to economic momentum this year,” it stated. The report noted that inflation continued to fall in May, coming in at 11.6 per cent from April’s 12.5 per cent.
It said reduced food price pressures had helped bring inflation down, although it remained far above the Central Bank of Nigeria’s target range of six per cent to nine per cent. “Our panelists see inflation averaging 12.3 per cent in 2018 and falling to an average of 10.4 per cent in 2019,” the analysts added. The Monetary Policy Committee of the CBN, in May, decided to hold the Monetary Policy Rate at a record high of 14 per cent amid above-target inflation.
“The Bank’s decision to hold the Monetary Policy Rate unchanged at a record-high reflects stubbornly high price pressures in Nigeria’s economy. All our panelists expect the CBN to cut the policy rate by year-end, with consensus at 12.22 per cent. Next year, our panelists see the policy rate ending the year at 11.81 per cent,” the report added.