The year 2020 may not be the magic one long expected as analysts say growth may be sluggish, at least the earlier part of the year.
Many years ago, all the hope of Nigerians were hinged on 2020, like vision 2020.
The Economic Intelligent Unit (EIU) said growth would be unchanged at 2.0 per cent like in 2019.
The worrisome part is that, the country’s population is growing much faster that its economic growth at 2.6 per cent.
However, the International Monetary Fund (IMF) still believes that GDP growth will increase to 2.3 per cent.
Growth will be constrained by infrastructure challenges (power shortages, poor rail, road
and port facilities). In addition to the infrastructure deficit, the country is also faced with
insecurity, elevated inflation and tight credit conditions.
With lower oil prices expected to
continue, the revenue forecast appears weak even with a projected increase in tax revenue and improvements in tax collection. High debt-servicing costs leave little headroom for the fiscal authorities to manoeuvre and this has left monetary policy as the main lever to drive an economic recovery.
The Central Bank of Nigeria (CBN)’s inclination towards boosting the supply side of the economy is likely to trigger contradictory pressures on inflation in 2020. Policy measures such as the hike in value added tax, the implementation of the minimum wage and cost reflective electricity tariffs will be inflationary. Inflation is already well above the CBN’s upper target limit of nine per cent.
The CBN has made it clear that an interest rate cut will only be considered when inflation enters a sustained downward trend and falls below the upper target limit of nine per cent. Any attempt at monetary loosening now could trigger capital outflows and put pressure on the exchange rate at a time of low oil prices.
