Research analysts at Vetiva Capital Limited, an investment banking firm, on Tuesday said there could be a minor growth rebound to 1.97 per cent in Nigeria’s economy by 2017, “driven by low base effect and a more stable foreign exchange market.”
Nigeria slipped into recession for the first time in 25 years with 2016 second quarter negative growth of 2.06, following from the first quarter -0.36 per cent, owing to sustained “pressure from low oil prices, FX liquidity tightness and fiscal imbalances at the Federal and State levels.”
In a report titled ‘Nigeria Outlook: Seeking a Winning Formula,’ the analysts “with lingering financial sector concerns coupled with adjustment to recent liberalisation in both the foreign exchange and Petroleum Motor Spirit (PMS) sectors, the negative growth path is set to continue for 2016.”
They “forecast growth at -1.72 per cent and -1.09 per cent respectively for Q3 and Q4 with full year GDP forecast at -1.32%, well below the 2.79% growth experienced in 2015 and initial CBN forecasts for 2016 (3%). This negative growth trend should reverse by mid-2017 as the effects of structural reforms and expansive fiscal policies come to the surface.”
A combination of insecurity, public sector inertia and private sector weakness, they stressed, remain main challenges to economic growth this year.
The Vetiva report recalled that the Purchasing Managers’ Index has betrayed sustained weakness in the economy so far, with business sentiment weakening for consecutive months since the turn of the year.
The Federal Government, the report continued, should take seriously its economic diversification agenda, which in the midst of the current disruption in the global oil market will keep Oil sector contribution to GDP low.
With the success of the diversification agenda, they expect that Nigeria’s agric sector would grow and assume a greater share of GDP, contributing as much as 25 per cent on a consistent basis by 2017.
“Rising inflation and a struggling Sub-Saharan economy continue to dampen business and investor confidence. 2016 will be remembered as a lost year from a fiscal perspective. Nonetheless, we expect a modest recovery in 2017 with growth largely bolstered by public finance reform, infrastructure improvement and domestic capacity augmentation,” the report added.
Source: News Express.
*Photo shows Nigeria’s Finance Minister Kemi Adeosun.