Analysts See More than 3% Jump in Second Quarter GDP Figure
Analysts at WSTC Securities Limited have projected a more than 3% growth in the Nigerian economy for the second quarter of 2021, citing gradually recovery economic activities and low base effects.
Post-lockdown, the Nigerian economic recovery has been coming off gradually from the trough, albeit slowly. The domestic economy exited recession in the fourth quarter of the fiscal year 2020 when output level jumped 0.11% year on year following a consecutive decline of 3.62% in Q3-2020 and 6.10% in Q2 2020.
Analysts attributed that the exit to the resilience of the Agricultural sector which gained 3.42%, supported services sector expansion of +1.31%.
Dragging the output level was a low performance from the Industrial sector remained in negative territory with 7.30% dropped as global economy steps into the healing process.
A track on Nigeria’s economic data shows that in the second quarter of 2020, GDP growth was negative due to pandemic-induced lockdown effects on productive activities.
In its macroeconomic report for the second half of 2021, WSTC Financial Limited said on balance, the firm expects the economy to grow by 3.37% year on year in Q2-2021.
The investment firm expects this to be primarily driven by the favourable base effect from the prior year amidst a moderate improvement in economic activities.
Pertinently as the firm’s analysts noted, it said the headline inflation moderated for the third consecutive month to 17.75% year on year in June from 17.93% in May.
Recalled that the headline inflation rate had jumped for 19 consecutive months before the first moderation was recorded in April 2021.
Analysts said the moderation in the average general price level was driven mainly by the high base effects from the prior year.
Although food prices remain high, analysts at WSTC said they note that its 45 basis points moderation to 21.83% year on year in June was the third consecutive month of the moderate increase and the lowest since February 2021 when it printed at 21.79%.
A slew of analysts maintained that the Central Bank will keep to tradition of holding key macroeconomics policies at the Monetary Policy Committee meeting scheduled for Monday and Tuesday.
“We expect the Committee to attribute the inflation moderation to the CBN’s intervention to the critical sectors of the economy to boost output and improve the supply of commodities.
“Accordingly, we believe the Committee would reiterate the need for the Federal Government to step up its fight against insecurity and improve critical infrastructure to make the business environment more conducive.
“Against this backdrop, we believe the Committee will feel the need to maintain its monetary policy stance and allow its interventions to continue to support recovery in economic activities”, the firm said.
Exchange Rate at the IEW to Remain Stable on Increased Intervention
In a related development, analysts are projecting a stable exchange rate for the second half of 2021 amidst a decline in the nation’s external reserves.
Nigeria’s gross external reserve has decreased by US$1.12 billion or 3.3%% since the last policy meeting to USD33.17 billion due to low inflow from foreign investors and accretion from the oil sector.
WSTC said the decline in the foreign reserves is tied to the increase in FX sales to foreign Portfolio Investors and manufacturers to meet the growing demand for goods, given the reopening of the economy.
Accordingly, the Naira has been stable at the Investors and Exporters Window, according to analysts report with naira exchanged at N411.63 at just concluded week.
“Notwithstanding, we remain optimistic that the rally in the crude oil prices and expected Eurobond issuance and disbursement of Special Drawings Rights (SDR) by the end of August from the IMF would drive accretion to the FX reserves in the near term”, WSTC said.
Accordingly, analysts said they are expecting the currency to remain relatively range-bound N410.00– N415.00 for a dollar at the Investors and Exporters window.
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In Q2-2021, the economy advanced by 0.51%, largely on account of a rebound of the Industrial sector.
The Industrial sector had declined in the three preceding quarters to Q1-2021, the decline WSTC analyst attributed to structural and legacy issues including poor infrastructure, weak household consumption, and low household income level.
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