Nigeria’s GDP is expected to grow between 1.7 and 2 percent in 2021 this could be possible Following the increase in economic activities and improving oil market conditions
This was the view of analysts at United Capital in its just-released report titled, ‘Nigeria’s Outlook 2021 – A shot at recovery‘. According to the report, the reopening of the borders in the fourth quarter (Q4) of 2020 should ease pressures on food prices, other structural factors such as FX market illiquidity, potential increases in petrol price, amongst others may keep general prices elevated.
The report added that, as a result, it expects the headline inflation rate to peak at around 16 percent before pulling back, if no further policy adjustment is made while stating that GDP growth should rebound by 1.7 to 2 percent.
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‘Again, the high base effect of the headline inflation spike in the third quarter (Q3) and Q4 of 2020 should moderate further increases in price levels. In response to rising inflation and in a bid to attract FPI inflows to the market, we imagine that the CBN would begin to tighten its monetary policy stance at some point in Q2-Q3 2021.
‘On the exchange rate, we expect a potential convergence of rates when the CBN begins full intervention at the I&E window. As such, we anticipate that the parallel market will appreciate from ₦470/$ towards the NAFEX rate which has now been adjusted to ₦410/$.
‘In 2021, the direction of the monetary policy would continue to drive the sentiments for stocks as regards the yield environment‘.
On the outlook of the Nigerian stock market, the analysts in the report said that their prognosis for the Nigerian stock market in 2021 is that there would be an increase in domestic participation which will be likely fuelled by dividend expectations, and would in turn sustain the market rally in the first quarter of 2021 while adding that in the absence of foreign demand, the market might witness a short-term bear market from Q2 to Q3 of 2021, it said.
The report went further to note that the monetary policies are expected to be flexed to stimulate the growth of the economy as well as assuage the subsisting harsh impacts of the COVID-19 pandemic in the course of the year 2021.
‘We imagine that monetary authorities will further ease or maintain policy rates at current levels till Q2 2021 to allow economies recover fully before contemplating tightening from Q3 2021.
‘The GDP of Sub-Saharan Africa (SSA) is expected to rebound in 2021, though the rate of recovery shall vary from country to country. The improved exports, as well as commodity prices are expected to drive the growth, more especially as the global demand seems to be gradually recovering from the devastating impact of the pandemic’, the report said.
Commenting on the report, market watchers who spoke with newsmen said with the second wave of COVID-19 infections and imminent lockdowns in several countries amid limited access to vaccines, the growth projections might be threatened.
AFRICA DAILY NEWS, NEW YORK.
