World Bank Cuts Nigeria Growth Forecast To 2.1%; Consumers Positive on Economic Outlook

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The World Bank, in its latest World Economic Outlook report released on Tuesday, April 17, 2018, at the 2018 WB-IMF Spring Meetings in Washington DC, lowered its projections for Nigeria’s economic growth rate to 2.1% in 2018, a cut from its 2.5% growth rate earlier forecasted in its January 2018 Global Economic Prospect report. Nevertheless, the declined growth rate projection still showed a 1.28 ppts
improvement in the economic activities of the West Africa’s largest economy in 2018, when compared with the actual Gross Domestic Product (GDP) of 0.83% recorded in 2017. The 2.1% growth rate was a lot lower than 3.5% growth rate projected by the Federal Government of Nigeria in its proposed 2018 budget. 

The Bank maintained that the growth would be catalysed by the improved revenue from high crude oil prices and increased crude production as well as recent foreign exchange measures by the Central Bank of Nigeria (CBN) which have contributed to foreign exchange availability. The report also showed that Nigeria would be under-performing the sub-Sahara Africa group of economies which the Bank projected to grow by 3.4% in 2018, up from actual 2.8% growth recorded in 2017. Available figures from the National Bureau of Statistics (NBS) showed that GDP in 2017 grew year-on-year (y- o-y) by 0.83% on the back of 4.79% y-o-y rise in the oil sector; also, the non-oil sector slightly grew by 0.47% y-o-y in 2017.The slight increase in the non-oil sector was especially driven by construction which rose by 18.72%; manufacturing which rose by 12.82% (of which ‘cement’, ‘ textile, apparel and footwear’ and ‘food, beverage and tobacco’sub sectors rose by 30.29%, 15.68% and 11.39% respectively); and agriculture which rose by 11.29%. In real terms, the non-oil sector contributed 91.32% to the nation’s GDP in 2017, a bit lower than the share recorded in 2016 (91.65%). We believe attaining a growth of above 2% in 2018 is dependent on right policy choices of the government. 

Already we have seen yields on treasury bills moderate on the back of signals from the Federal Government (FG) to change it financing strategy by looking to reduce it domestic borrowings and increase it external borrowings this year, 2018. This would enhance financial inclusion by lowering domestic borrowing cost which is expected to stimulate the real sector growth and boost non-oil revenue. In addition, increased fiscal spending plan would have a positive effect on the local economic activities. Consequently, growth from the non-oil sector would complement the growth we already witnessed in the oil and gas sector and thus deliver the above 2% GDP growth forecasts. In another development, the consumer expectations survey report released by the Central Bank of Nigeria (CBN), on Monday, April 16, 2018, showed that consumers are positive on Nigeria’s economic outlook for the remaining part of the year, 2018. The overall consumer confidence index for Q2 2018 and next twelve months were positive at 20.8 points and 28.5 points respectively; indicative of their optimism of an increase in investments, household income and savings amid 

anticipated improvement in the country’s economic conditions. 

This was despite the negative perception of economic conditions in the Q1 2018 as reflected by the confidence index which was negative 6.4 points, albeit, better than the negative 29.4 points reported in Q1 2017. The apex bank’s survey sampled opinion of consumer expectations on price changes, buying intentions, borrowing and exchange rates and unemployment for the next twelve months. However, majority of the consumers believe that the next twelve months would not be an ideal time to purchase big-ticket items such as motor vehicles and houses as their buying intentions indexes stood at 46.1 points and 41.9 points respectively, below the average index points of 50.0. 

Source – Cowry Assets Management Limited.

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