Story by Kayode Tokede
The nation’s Gross Domestic Product (GDP) recorded a growth rate of 2.38per cent in the fourth quarter of 2018 and 1.93per cent for the full year.
The report by National Bureau of Statistics (NBS) last week disclosed further that GDP growth in 2018 was driven by both the oil sector and the non-oil sector, most especially
The federal government had noted that growth is expected to increase from 0.8per cent in 2017 to 2.1per cent in 2018 and 3.01per cent in 2019 with the continuing implementation of the Economic Recovery Growth Plan (ERGP).
ERGP, which underpins government’s economic recovery actions, is the basis for medium term fiscal strategy to achieve sustained economic growth, diversification and social inclusion.
Before now, the World Bank had put the estimated growth rate for Nigeria’s economy in 2019 at 2.2 per cent with its forecast oil price at average $67 per barrel for the current year and next year, down $2 from its projections last June.
Given World Bank and other International agencies predictions, a Lagos based analysts at PanAfrican Capital Holdings Limited said economic growth for 2019 is based on external factors and domestic factors.
The Head, Investment Research & Business Development at PanAfrican Capital Holdings, Mr. Moses Ojo in a report titled ‘Economic Review & Outlook’ obtained by correspondent disclosed that domestic factors that tends to shapen this year’s nation economy include outcome of the 2019 general election, probability of change in the leadership of the CBN, the relationship between the Executive and the Legislature post-election.
Other factors include expected delay in the passage of the 2019 budget, review of minimum wage, banking sector vulnerability and the review of items that cannot access foreign exchange.
According to the report, foreign factors highlighted by his firm include direction of the U.S. interest rates, trade tension, projected low prices of crude oil.
The report stated that “The downside risk to the outlook are; unsuccessful election, crude oil price shock and production shock, banking sector vulnerability, elevated trade tension, security challenges and weak consumer spending.
“The expected policy responses to the downside risk are; increased borrowing, subsidy removal – partially of fully, increase in VAT on some items, renewed interest in privatisation and concessioning and further devaluation.”
The report by PanAfrican Capital Holdings expressed that the Global economic growth is moderating as the recovery in trade and manufacturing activities loses steam, trade tension among major economies remained elevated.
According to the report, trade dispute combined with concerns about weakening global growth prospects weigh on investors’ confidence and contributed to global equity decline.
“Therefore, global economic growth is estimated at 3.7per cent in 2018 and 3.5per cent was projected for 2019 to be driven by the emerging markets.
“The risk to the global economic outlook are; rising trade tension and policy uncertainty, uncertainty over Brexit negotiation, geopolitical risk and the direction of the commodity prices.”
The report stated that recovery in sub-Saharan Africa continues, although at a slow pace.
“The sluggish recovery was due to weaknesses in the region’s largest economies – Nigeria, South Africa and Angola.
“The region faced a more difficult external environment in 2018 as the global growth moderated and financing conditions tightened. Commodity prices diverged, while oil prices were higher, the prices of metals and agricultural products dampened by weakening global demand. In Nigeria, oil production fell partly due to pipeline closure while non-oil sector was affected by weak consumer demand and the security challenges in the northern part of the country.
“On the external front are; slow growth in China and Euro Area, elevated trade tensions, normalization of monetary policy in advance economies, negative commodities price shock and high sovereign debt.
“On the domestic front, the risks to the outlook are; political uncertainty in countries holding elections in 2019 – Nigeria, Malawi, Mozambique and South Africa. Others downside risks are insurgencies and armed conflict, adverse weather condition and rising financial sector stress.
“Furthermore, the price of crude oil was volatile in 2018 due to supply concerns which saw Brent Crude Oil traded at an average price of $69.54 with the highest and the lowest price of $84.82 and $51.02per barrel in the year respectively.
“Also, global demand and supply averaged 98.8mbpd and 98.3mbpd accordingly. The supply concerns that affected the prices of crude oil in 2018 are; the U.S. sanctions against Iran, OPEC actions and reactions, the collapse of production in Venezuela and unexpected outages in Canada and disruptions in Libya. From the foregoing, crude oil prices is projected to average US$60 per barrel in 2019.”