Nigeria’s GDP growth to rebound between 1.7% to 2.0% in 2021 – United Capital report
- 14th January 2021
- Posted by: Hakeem
- Category: Economics
Nigeria’s GDP is expected to grow between 1.7% and 2.0% in 2021, largely predicated on increased economic activities and improving oil market conditions.
This disclosure was made in the “Nigeria Outlook 2021 – A shot at recovery” report released by United Capital.
According to the report…
- “In 2021, we expect GDP growth to rebound by 1.7% to 2.0%, buoyed by increased economic activity and some improvements in the oil market. Although the reopening of the borders in Q4 2020 should ease pressures on food prices, other structural factors such as FX market illiquidity, potential increases in petrol price, etc. may keep general prices elevated. As a result, we expect the headline inflation rate to peak at around 16.0% before pulling back, if no further policy adjustment is made.
- “Again, the high base effect of the headline inflation spike in Q3 and Q4 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 N470/$ towards the NAFEX rate which has now been adjusted to N410/$.
- “In 2021, the direction of the monetary policy would continue to drive the sentiments for stocks as regards the yield environment. Accordingly, our prognosis for the Nigerian stock market in 2021 is that domestic interest, fuelled by dividend expectations, is likely to sustain the market rally in Q1-2021. However, in the absence of foreign demand, we see a short-term bear market from Q2 to Q3-2021”
Other key highlights of the report
- In the course of the year 2021, 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.
- The report succinctly states, “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.
With the second wave of COVID-19 infections and imminent lockdowns in several nations amidst limited access to vaccines, the growth projections might be threatened.