Uncertainties Threaten Nigerian Economic Recovery, Growth Projection
Uncertainties in the Nigerian economy pose a big threat to recovery and growth projection for the financial year 2021 as key indices reflect a weak start following tepid growth reported in the fourth quarter of 2020.
After about two percent drop in 2020, the Nigerian gross domestic product (GDP) printed at $443 billion amidst the outbreak of coronavirus pandemics. However, the Nigerian economic balance sheet is projected to jump 2.5% as the global economy recovers from the shock.
But analysts said some developments in the domestic economy have heightened concerns about recovery and growth projection including slow vaccination rate in the country.
Thus far, Nigeria’s headline inflation rate has continued to rise unabated without policy strategy to curb further upward trend in addition to the steep rise in the unemployment rate.
Nigeria’s weak macroeconomic data is a downside to economic recovery and growth projection, analysts told MarketForces Africa as stakeholders await the release of first-quarter gross domestic products (GDP) from the Bureau of Statistics.
In a report note, the FSDH group said despite the positive GDP growth in the fourth quarter of 2020, inflows from foreign direct investment (FDI) and portfolio investment (FPI) remain low in the first quarter of 2021.
“This suggests low investors’ confidence amidst uncertainties relating to foreign exchange management and insecurity concerns”, analysts added.
However, it was that Nigeria maintained its position as the largest economy in Africa as actual real GDP growth in 2020 was -1.9%, however, nominal GDP expanded by 5.6%.
Nigeria’s GDP printed at $443 billion in 2020 followed closely by Egypt which recently displaced South Africa (GPD-$283 billion) as the second largest economy in Africa, recorded $362 billion GDP size.
Also, Angola and Morocco were noted to have GDP size valued at $147 billion and $112 billion respectively.
Meanwhile, FSDH noted that Nigeria’s real GDP loss stood at N3.2 trillion in 2020, mainly due to COVID-19, as analysts expect real GDP growth for 2021 to be positive.
“For real output to return to pre-COVID-19 level of N71.4 trillion in 2019, the economy will have to expand by 2%. Key challenges of insecurity, stagnant crude oil production, foreign exchange scarcity and lower investment inflows are major risks to economic growth in 2021”, FSDH said.
FX, Inflation, Unemployment Threat
As the inflation rate gallops, the Nigerian local currency (Naira) purchasing power has reduced given the fact that the Central Bank has devalued its official exchange rate by more than 92% in the last five years.
Analysts said insecurity, logistics bottlenecks, high fuel cost are key factors that continue to affect general price level.
With joblessness rate at 33.3%, Fitch Ratings said in a report that weak consumers spending will weigh on growth, noting that high inflation will curb spending power.
The twin evil of unemployment and inflation undermine policy authority performance as various economic policies somersaulted, an example both anchored borrower programmes and border closure.
The Nigeria has continued to seeing value in local industry protectionism due to poor country’s competitive/comparative advantage.
“Comparatively, the largest economy in Africa appears to have no production advantage in anything – a core problem that needs authority attention”, Economists said at MarketForces Africa forum on Friday.
They also noted that government land border policy was a total failure when consider how prices of food items have reacted.
Rather than real cost, inefficiencies have been priced into all goods and services from intermediation to final goods.
Though, the International Monetary Policy, (IMF) has projected that Nigerian economy will grow 2.5% in 2021, things appear worst at the moment for individual and corporates.
While the economy is projected to rise 2.5%, Nigerian population is expected to grow at 2.6% on the average, which would result to a decline in per capital income.
Still, the growth projection is anchored on oil prices recovery rather than some sort of strategic policy development which this administration is lacking.
In Nigeria, 33.3% of labour force are out jobs and these people have to at least eat. One would be forced to ask if there is connection between joblessness and Ak-47 wielding economy.
Speaking of food, market prices have inched higher significantly following 19 consecutive months of price increment without commensurate adjustment to labour wages.
While there is pressure on household finances, some States are finding it difficult to pay N30,000 minimum wage.
“The foreign exchange market continues to witness supply shortage of foreign currency to meet demand. Consequently, the gap between the various markets keeps expanding.
“Foreign exchange pressure will continue into the second quarter owing to limited inflows from both crude and non-oil sources, rising imports, and a backlog of foreign currency demand”, FSDH said in a report.
Inflation rate printed at 18.17% in March after 19 consecutive month-on-month jumps, driven by increased food prices across the nation.
Saddle with the responsibility to ensure price stability, the Nigerian monetary policy said at the policy committee meeting that supply chain shock is a key factor driving headline inflation rate.
Coming at the heels of the rising inflation rate is joblessness which has widened the misery index among Nigerians.
Uncertainties Threaten Nigerian Economic Recovery, Growth Projection
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