2018: 3 Things To Expect From Nigeria's Economy
West Africa’s leading investment banking firm, Afrinvest held a press conference on Tuesday in Lagos where it reviewed economic activities of 2017.
Projections were also made of what to expect from the Nigerian economy in 2018.
The Group Managing Director of the firm, Ike Chioke noted that following Nigeria’s exit from recession, things have taken a positive turn.
He pointed out several indices including the rebound in crude oil output, recovery in export proceed, external reserves recovery and strengthening in capacity of the Central Bank of Nigeria, CBN to continue to intervene in the foreign exchange market, as signs that "all parameters are already aligned to favour Nigeria".
So, here are 3 major things to expect from the economy this year, according to the firm's projections:
1. Sustained GDP Growth: Gross Domestic Product, GDP as you know, is a monetary measure of the market value of all final goods and services produced in a period of time by a country.
The recession that Nigeria’s economy slipped into in the third quarter of 2016 was a consequence of a decline in Nigeria’s GDP. It was the first Nigeria suffered in 25 years.
The economy has since the third quarter of 2017 recovered and Afrinvest is optimistic the growth could only get stronger in 2018.
The firm said in its outlook that “against the backdrop of expected rebound in non-oil sector and oil sector low base push, we forecast GDP growth to accelerate to 2.1% in 2018 from our full year estimate of 0.7% for 2017”.
2. Inflation Decline: Prices of goods and services have been on a persistent decline since first quarter of 2017, according to National Bureau of Statistics, NBS.
This is a result of combination of factors, chief among which are the several monetary policy measures of CBN such as the foreign exchange policy and retention of benchmark interest rate at 14% for the entire year.
But there had been fears there could be spike in inflation following the end of the harvest season and expected increase in spending as the election year approaches, but Afrinvest’s outlook foresees otherwise.
The firm says “despite the risk factors, …near term inflation outlook remains benign due to constrained political will to implement supply side reforms ahead of the 2019 elections”.
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It noted that “supportive oil earnings tailwind will also buy the federal government more time to contemplate the reforms", adding that its "base-case scenario projects headline inflation moderating further to 12.3% by year end 2018”.
Inflation currently stands at 15.37%.
3. Sustained Current Account Balance: In simple terms, current account balance tries to explain where a country stands in terms of goods and services exported compared to imports.
A current account surplus indicates that the value of a country's net foreign assets (i.e. assets less liabilities) grew over the period in question, and a current account deficit indicates that it shrank.
Apparently, Nigeria was doing badly prior to exit from recession but the table has since turned and as the Afrinvest Outlook pointed out, “external sector indicators turned positive in 2017 with the current account surplus jumping nearly four times, from $2.5 billion in 2016 to $9.5 billion in 2017”.
This is even as capital importation (foreign investment) which was at $9 million in 2017 rose “91.5% year-on-year to a 2-year high of $6.8 billion”.
This trend is expected to continue in 2018, according to the Afrinvest’s projections.
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