However,
there is a growing sense of unease over the failure of Nigeria to pass the 2018
national budget. Despite the tremendous amount of effort injected to getting
the “budget of consolidation” to the National Assembly last November, it has
been embarrassingly delayed on repeated occasions. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With Nigeria being closely watched by global investors, such developments are
likely to slowly erode confidence over the stability of the nation’s political
landscape.
It
must be kept in mind that the Central Bank of Nigeria has already warned the
Federal Government that “hard work” will be needed to prevent the country from
skidding into another recession. While the 2018 budget has the ability to elevate
Nigeria’s economy to new heights, there is a threat that the delay in
implementation could negatively impact its overall effectiveness.
It is
worth noting that the N8.612 trillion budget was expected to consolidate the
positive gains of the 2017 budget, and support the materialization of Nigeria’s
economic growth recovery plan. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Nigeria’s government remains on an ongoing quest to develop infrastructure and
bolster investment in agriculture, but haste is needed. While rising oil prices
have boosted government revenues and foreign exchange reserve, the long-term
solution to Nigeria maintaining stability and steady growth remains in
diversification.
Nigeria
should exploit the fact that the current oil price of $68.00 is $23.00 above
the crude oil benchmark price of $45.00 per barrel in the budget. It is
critical to keep in mind that oil can easily confiscate all it has gifted to
Nigeria, and even more so if prices start to depreciate. While the outlook for
oil in the short term remains somewhat bullish amid geopolitical tensions and
OPEC optimism, the fundamentals behind the rally remain shaky. With Oil bulls
heavily reliant on geopolitics to sustain the current rally, and rising
production from US Shale obstructing OPEC’s efforts to stabilize markets, oil
remains vulnerable to losses long term. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With regards
to the core economic metrics, consumer prices in Nigeria have eased repeatedly,
ultimately suggesting that inflationary pressures are slowly becoming a thing of
the past. With inflation cooling for the 14th consecutive month in
May at 13.34%, consumer price growth dipped below the 14% benchmark interest
rates for the first time in two years.
Manufacturing
PMI rose to 56.9 in April, jumping from 56.7 in March, painting a positive
picture of Nigeria’s manufacturing sector. The combination of improving
economic data and falling inflation should prompt the Central Bank of Nigeria
to cut interest rates in an effort to support growth. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
While an interest rate cut in the second quarter of 2018 could be somewhat
premature, the CBN could rattle rackets by taking action in the third quarter
of 2018.
The
mighty Dollar is likely to remain a major talking point across financial
markets as rising US bond yields and expectations of higher US interest rates
support the currency. With positive economic data boosting expectations of
higher US interest rates, emerging markets could feel the heat. Fears of
capital outflows are likely to weigh heavily on EM Currencies like the Naira.
While a resurgent Dollar could enforce downside pressure on the local currency,
Nigeria’s robust foreign exchange reserves could limit downside losses.
However, if reserves start to dwindle in the event of falling oil prices, the
Naira could find itself exposed to downside risks.
As we
head deeper into the second trading quarter of 2018, markets will be paying
very close attention to a variety of key themes. The developments revolving
around the 2018 national budget will be in sharp focus. Investors are likely to
closely observe oil prices and the potential impact of an appreciating Dollar
to the Nigerian economy. On the bright side, President Muhammadu Buhari
recently became the first African president to be welcomed to the White House. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
This symbolic visit is likely to boost sentiment and positively impact the
Nigerian economy in the long term, as it continues its quest to diversify away
from oil reliance to more sustainable sources of growth.
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