The healthy
combination of easing inflationary pressures, foreign exchange stability and
rising commodity prices initially stabilized Nigeria’s macro fundamentals. With
domestic conditions clearly improving and foreign investor appetite increasing,
expectations were elevated over the Central Bank of Nigeria (CBN) cutting
interest rates to stimulate further growth. The outlook for Nigeria looked
highly encouraging up until mid Q2 2018 when economic growth slowed for the
first time since the end of the recession. The deceleration in growth acted as
a critical wakeup call to speed up efforts in diversifying away from oil
reliance.
However, sentiment was dented further by the
repeated delay of the 2018 budget which was finally passed in June 2018.
Although Nigeria managed to hold its ground during the first half of 2018, it
must be kept in mind that the nation found itself vulnerable to external shocks
– namely an appreciating Dollar and oil price volatility. An appreciating
Dollar, global trade tensions and prospects of higher US interest rates
punished many emerging markets in 2018 with Nigeria falling into the category.
Although the Naira witnessed stability despite an appreciating Dollar, this
came at a heavy price to the CBN in the form of falling external reserves.
Global trade
tensions presented a significant risk to Nigeria, especially when considering
how the United States and China remain its biggest trading partners. With a
trade war threatening global economic growth and demand for commodities, this
presented challenges to Nigeria which remained heavily depended on earnings
from oil exports. While there was scope for the CBN to cut interest rates to
boost growth, this window of opportunity was missed when inflationary pressures
returned.
Focusing on macro fundamentals, the picture
looks somewhat encouraging with GDP expected to rise 2% in 2018. Signs of
Non-Oil sectors contributing to growth will be a welcome development that
highlights how Nigeria remains on a quest to break away from oil reliance. With
Nigeria’s economic resilience potentially stimulating investor risk appetite,
the Nigerian Stock Exchange has the opportunity to rebound in 2019. Although
manufacturing production decreased 1.7% in September, a rebound could be in the
cards as increased government spending ahead of the presidential elections
boosts economic growth.
In regards to CBN policy, falling oil prices
are seen weighing on the Naira’s peg against the Dollar on the official
exchange. This may complicate the CBN’s effort to defend the Naira on the
parallel markets in 2019. While a weaker Dollar could limit capital outflows,
falling oil prices are poised to shave government revenues.
Focusing on oil prices, the outlook remains
tilted to the downside amid oversupply fears and concerns over weaker oil
demand. With markets struggling to find signs of the oil market rebalancing
following OPEC and Russia’s deal to cut production by 1.2 million barrels per
day and global growth fears fuelling concerns over falling demand, oil prices
remain fundamentally bearish. Severely depressed oil prices have raised
concerns over Nigeria’s ability to move forward with the 2019 budget which
pegged oil prices at $60 per barrel. With falling oil prices eroding government
revenues, Nigeria’s Excess Crude Account (ECA), which has already depleted by
roughly 73% in three weeks, is seen falling further.
Although the short-term outlook paints a
gloomy picture, as we enter the New Year there is still some light at the end
of the tunnel. With diversification in motion, government spending expected to
increase and infrastructure developments in the pipeline, the longer-term
outlook remains bright.
Have you heard this? Many Nigerian exporters have been defrauded of huge amount of money in the process of exporting commodities to foreign countries. Do you know why? They were not trained on export operations, management, documentations and the best methods of payment in export trade. This is terrible!!! Nigerians cannot continue to lose money to foreigners in the course of export business. Exporters, why don’t you get a practical manual that teaches the stages of export trade from processing and packaging of commodities to receipt of payment by the foreign buyers. It teaches export operations, export management, export documentations and methods of payment in export trade? It is a contemporary step-by-step guide to export trade. It tells all the contemporary dynamics in export trade. To get it, click on the link below:
http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
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