Depressing outlook as analysts cut economic estimates
Economic analysts said that they are seeing some rough edges in the Nigerian macroeconomic indicators that signal unwelcome expectations and would impact negatively on the overall economic prosperity in the nation in 2019.
At the MarketForces analysts forum, some pundits expressly said that Nigerian merchant in hope failed to reflate or build underlie economic fundamentals; on the back of misplace priority and lack of strong economic blueprints.
There have been slow implementations of policy strategies and workable plan, analysts said.
GTI Research in its second quarter outlook relate that since exiting its first recession in nearly three-decades in the second quarter of 2017, the Nigeria economy has continued its recovery drive, albeit at a slow pace.
The National Bureau of Statistics (NBS) reported that Nigeria’s GDP grew at an annualized rate of 1.93 per cent in 2018, and this is significantly low to support its population growing at an estimated annual rate of 2.7 per cent.
Analysts frown at the nation’s debt stock that reached all time high in March, 2019, marking a low point in the macroeconomic redirection needed to spur inclusive economic growth. Growth in population continues to outpace gross domestic performance uptrend.
Debt service accounts for significant part of the budget in 2019, even Federal government cut spending per head at the time when average inflation rate crossed 11.3 per cent.
However, despite the high cost of crude oil in most part of fiscal year 2018, the oil sector component of Nigeria’s GDP underperformed its non-oil pair, it then surged by 1.14 per cent in the period.
This could be attributed to three consecutive quarters of the sector’s contraction, from second to fourth quarter in 2018, owing to the declaration of force majeure on some oil wells, for example Nemebe-Creek pipeline in the second quarter, low domestic output in the third quarter and weak global demand the fourth.
Growth of the non-oil sub-sectors – Agriculture, Industries, and Services were also disappointing given the country’s potentials.
The three sub-sectors recorded an annual growth of 2.12 per cent, 1.94 per cent, and 1.83 per cent respectively in 2018, as against historical averages of 4.1 per cent, 13.3 per cent and 5.8 per cent as highlighted in the Economic and Recovery Growth Plan (ERGP) document.
Interestingly, we noticed contraction of many key non-oil sub-sectors which includes Real Estate 4.74 per cent, Trade 0.63 per cent, Human Health & Social services 0.32 per cent and Education 0.03 per cent in 2018; all of which undermine the overall performance of the non-oil sector, GTI Research stated.
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With the recent first quarter of fiscal year 2019 GDP growth printed at 2.01 per cent due to slack in major sectors, we anticipate positive but slow growth for both the oil and non-oil sector of the economy in second half of the year.
This is owing to lack of clear-cut growth-enhancing policy, domestic, and escalating effect of the trade tension, external.
“Hence, we project an annual GDP growth rate of 2.2 per cent for 2019”, GTI Research estimated.
Meanwhile, since the beginning of the year, Nigeria’s inflation rate has remained upbeat.
GTI Research said that over the last 12-months period, Nigeria’s headline inflation, a measure of the average change in the general price level of goods and services, fluctuated within the bound of 11.20 per cent – 11.50 per cent since touching a two-year low of 11.14 per cent in July 2018.
This was mainly driven by reduced price pressure on both farm (food inflation) and non-farm (core inflation) products in the larger part of this period, GTI Research said.
However, the reduced price pressure on farm produce was supported by favourable climatic conditions and increased government intervention in the Agric sector on one hand, and base effect on the other.
On the flip side, the reduced price pressure on non-farm produce (core inflation) was mainly aided by the relative stability in the foreign exchange market due to the CBN regular intervention.
Ogochukwu Ndubuisi, a market analyst while presenting report on how Nigerians are coping with price changes in the market said, scarcely would you see any commodity that has not added price since the beginning of the year.
“With the recent uptick in the food price sub-component, since April 2019, we anticipate a further upswing in the Headline inflation rate in the second half of the year, especially when the new minimum wage becomes fully implemented across states of the federation.
Overall, we expect the average headline inflation rate for 2019 to settle at 11.50 per cent, GTI Research estimated
Depressing outlook as analysts cut economic estimates
