It has
certainly been an explosively volatile trading quarter thus far as investors
juggled with global trade tensions, Dollar strength and chaos across emerging
markets. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The
simmering trade dispute between the world’s two largest economies fuelled
global risk aversion while a brutal sell-off in the EM space rattled investor
confidence. With fears mounting over a full-blown trade war triggering global
instability and negatively impacting growth, emerging markets especially remain
under extreme pressure.
Fears
remain elevated over the turmoil in Turkey and Argentina spreading like a virus
across developing and developed nations. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With the South African economy already descending into a recession, will
Nigeria be the next economy to take a hit?
Throughout
the third quarter of 2018, Nigeria has kept afloat with GDP expanding 1.5%
during Q2 and inflation easing 11.14%. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Although the nation’s external reserve dropped to the lowest since March to $45
billion, it still remains at manageable levels. With oil prices somewhat
supported by geopolitics and the Naira displaying a degree of stability against
the Dollar, the outlook looks somewhat encouraging. However, external risks in
the form of an appreciating Dollar, prospects of higher interest rates and
trade tensions could cripple Nigeria’s fragile recovery.
Contagion
fears stemming from the EM selloff may force investors to scale back on
investing in emerging markets, including Nigeria, while capital outflows could
complicate the Central Bank of Nigeria (CBN)’s effort to defend the Naira. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Although expectations were initially elevated over the CBN cutting interest
rates in the second half of 2018 to stimulate growth, the current global and
domestic economic landscape could force the central bank to maintain the status
quo.
A CBN
rate cut will widen the interest rate differential with the Federal Reserve,
ultimately accelerating capital outflows and threating price stability. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
With inflation also expected to rebound thanks to election spending, some even
feel the CBN may end up hiking rates instead.
Referring
to price stability, the Naira, like most other emerging market currencies,
remains impacted by external forces. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Although the local currency has barely budged against the Dollar, this is based
on the CBN’s repeated intervention in the FX markets. While this strategy could
ensure the local currency remains supported in the short term, Nigeria’s
external reserves are already feeling the pressure. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
On the plus side, with Nigeria achieving a current account surplus, the Naira’s
punishment may not be as severe as those currencies belonging to markets with a
high account deficit.
Although
Nigeria’s economic prospects remain tied to Oil prices, the upcoming
presidential elections could play a leading role in determining if the nation
is able to conclude this year on a firm footing. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The increased spending ahead of the February elections will most likely be a
welcome development for economic growth. If Oil prices remain at current levels
and support both government revenue and consumption, this may stimulate the
recovery further. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The
largest economy in Africa still has the ability to shock the world stage this
year. While it is widely known that the cure to Nigeria’s illness - Oil
dependency - can be found in economic diversification, the correct steps must
be taken while the conditions are still accommodative. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
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