Analysts at United Capital Plc have said that Nigeria’s Gross Domestic Product (GDP) could rebound to 2.0 percent in 2021, as economic activity and rise in oil prices will likely be the militating factor.
The analysts made the prediction in the company’s “Nigeria Economic Outlook 2021” obtained by FirstNews yesterday. According to the analysts, although the economy slipped into another recession as GDP contracted in Q2 and Q3-2020.
“in 2021, we expect GDP growth to rebound by 1.7per cent to 2.0per cent, buoyed by increased economic activity and some improvements in the oil market” they said.
They stated that while the reopening of the country’s land borders in Q4’20 could lead to a reduction in food prices, “other structural factors such as FX market illiquidity, potential increases in petrol price, may keep general prices elevated.”
According to them: “We expect the headline inflation rate to peak at around 16.0per cent before pulling back, if no further policy adjustment is made. The high base effect of the headline inflation spike in Q3 and Q4’20 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. Finally, on the exchange rate, we expect a potential convergence of rates when the CBN begins full intervention at the Investors’ and Exporters’ ( 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/$,” they added”
However, The World Bank had in its semi-annual Global Economic Prospects report released, last week, revised downwards Nigeria’s 2021 growth forecast to 1.1 per cent from the 1.7 per cent it projected for the country in June last year.
The bank said it cut Nigeria’s growth forecast for this year by 0.6 per cent because it expects economic activity in the country to be dampened by low oil prices, falling public investment due to weak government revenues, constrained private investment due to firm failures, and subdued foreign investor confidence.
According to the Bretton Woods institution, Nigeria’s economic growth this year is also expected to be weaker than earlier projected given that “private consumption prospects will be weighed down by lost incomes and higher precautionary saving among non-poor households, as well as lower remittances and the depletion of savings among poor and unemployed households”