Against the backdrop of a pessimistic global outlook for 2019, analysts see a growth forecast for the Nigerian economy at 2.1 per cent Year-on-Year (YoY) in 2019.
Analysts at CSL Research said, “we expect growth from the non-oil sectors, led by the information and communication sector as the adoption of information and communication technology (ICT) by the country’s teeming population continues. However, we believe growth in the real sectors will remain subdued due to structural problems”.
Despite increased uncertainty in the oil market, CSL raised oil price forecast to average $68/bbl in 2019 from $60/bbl at the start of the year. For the rest of the year, it anticipates that crude supply in the global market will continue to remain tight on the back of OPEC plus production cuts and continued supply disruptions from the shaky-five (Iran, Venezuela, Libya, Angola and Nigeria).
Through first half of 2019, the naira remained relatively stable at both the parallel market and Investment and Export (I&E) window at c.N360/$. The accommodative monetary policy stance adopted by the US Fed limited the outflow of capital from emerging markets and eased pressure on local currencies, the Naira inclusive. In addition, higher oil prices and the negligible growth in imports which reduced demand for the dollar, fuelled accretion in reserves to support the Naira.
“Looking ahead, we expect the Naira to remain stable at c.N360/$ for the rest of the year, supported by our optimism around global oil prices and portfolio flows for the rest of the year”, said CSL.
On account of expectations of a stable Naira exchange rate, it expects the inflation to average 11.1 per cent in 2019 (2018: 12.1 per cent) supported by a slackening in price pressure on both the food and core sub-indices, compared to 2018.
With respect to monetary policy, the analysts anticipate a further rate cut of no more than 50 basis points (bps) before the end of the year. Though the decision by the MPC to lower the MPR in March, signals the adoption of a pro-growth approach, we see a need for the MPC to loosen cautiously to sustain portfolio flows to the economy.
