Despite a lower growth projection for Nigeria by the International Monetary Fund (IMF) as well as the upcoming general elections in the country, analysts have said they expect a high economic growth beyond the 2.1 per cent which the IMF projected.
The IMF on Monday had projected an economic growth of 2.1 per cent for 2018 and 1.9 per cent for 2019, two weeks after the World Bank projected a 2.5 per cent growth for the country. The IMF’s outlook forecasts for growth in Nigeria has been raised from 1.9 per cent which it had earlier projected for 2018 and 2019.
However, analysts at FSDH Merchant Bank and FBN Quest say they expect a faster growth for the country economically. While FBN Quest analysts see a 2.4 per cent growth in Gross Domestic Product (GDP) of the country, analysts at FSDH Merchant Bank are more optimistic with a 3.1 per cent growth forecast.
FBN analysts believe the economic growth of the country in 2018 will be hinged on a “modest fiscal stimulus, a pick-up in oil production, selective private investment and the boost to foreign exchange availability arising from the CBN’s multiple currency windows.”
FSDH analysts who forecast a real GDP growth rate of 3.16 per cent in 2018 and 4.09 per cent in 2019, say the growth will be driven by agriculture, trade, and mining and quarrying sectors, which are expected to grow by four per cent, two per cent and 3.2 per cent respectively during the course of the year.
Their forecast is based on the performance of agriculture as well as mining and quarrying sectors in their contribution to the growth rate of 1.4 per cent recorded in the third quarter of 2017. Agriculture, had recorded a growth of 3.06 per cent, while mining and quarrying, a growth of 25.44 per cent and other services a growth of 1.72 per cent.
“FSDH Research has observed increased activities in Agriculture, Mining and Quarrying (oil and gas), manufacturing, Trade, Real Estate and I&C in the last few months. Some light manufacturing activities are also taking place – stimulating demand for raw materials from Agriculture. The current oil price will encourage investment activities in the oil and gas sector,” the analysts noted.
The analysts however noted that there are downside risks to the forecast growth, as social unrest and rising violence in some parts of the country may affect economic activities. “The rising social unrest in some parts of the country may affect economic activities and lead to escalating inflation rate. Also a significant drop in oil price may also have negative impact on the growth prospect” FSDH analysts noted.
Analysts at FBN Quest also noted with interest that the IMF commentary sites the political uncertainty in South Africa but does not allude to the elections in Nigeria scheduled for early 2019. According to the IMF, “The growth pickup in Sub-Saharan Africa (from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019) is broadly as anticipated in the fall, with a modest upgrade to the growth forecast for Nigeria but more subdued growth prospects in South Africa, where growth is now expected to remain below 1 percent in 2018–19, as increased political uncertainty weighs on confidence and investment.”
Also, the IMF stated that fiscal policy was generally constrained by the need to gradually rebuild buffers, especially in commodity-dependent emerging market and developing economies. With the recent respite provided by the cyclical rebound in commodity prices, it urged policymakers to guard against the temptation to defer reforms and budgetary adjustments for later.
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