Nigeria: Crouching Tiger, Hidden Lion

Proshare

Wednesday, February 13, 2019 6:30AM /Proshare Research


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Nigeria as the largest economy on the African continent is also one of the most vulnerable to adverse global economic outcomes.  The high dependence of Nigeria on oil exports for federal revenues and foreign exchange earnings implies that weakness in international oil markets will cause major tremors in the domestic economy. The principal problems that are likely to be a drag on economic performance in 2019 include but are not limited to the following:

 

  • Large debt service ratio –debt service in 2018 was over 60% of federal fiscal revenues and is likely to remain so for 2019 as the government tries to cope with falling revenue and rising recurrent expenditure. This is despite a fall in the size of the federal budget from N9.6trn in 2018 to N8.8trn in 2019.
  • High dependence on oil- as the country’s single most important export earner- 80% of foreign exchange earnings and 90% of foreign export earnings come from the oil sector. Oil will stay a critical factor for the economy in 2019 and will clearly dictate the growth in all other sectors of the Nigerian economy.

                                                                                          

Proshare Nigeria Pvt. Ltd.

Source: macrotrends.net, Proshare

  • Relatively low domestic productivity-PMI was +61.1% in December 2018 (up from +57.9% in November 2018) and is expected to rise to between +64.2%  and +65.5% in 2019 if oil prices hold up and the government implements a minimum wage of N30,000

 

Proshare Nigeria Pvt. Ltd.

Source: Central Bank of Nigeria (CBN)

  • High domestic inflation rate –still at +11.28%; but if the CBN sustains tight money supply inflation could fall to between +9.7% and +10.2% in 2019

Proshare Nigeria Pvt. Ltd.

Source: National Bureau of Statistics (NBS), Proshare

 

  • Slow GDP growth- +1.81% in Q3 2018 -GDP growth rate may not exceed +2.2% in 2019 as tight monetary policy and tighter fiscal policy will slow private consumer spending to counteract the effects of a rise in salaries and wages
  • Large budget deficit- this was -5.7% in 2017 (up from -2.1% in 2016) and is projected to be around -5.9% in 2018; 2019 figures may still see a deficit in the region of -6.2% factoring in the impact of higher adjusted recurrent expenditure of N160billion for public service salary increases within the year.


Proshare Nigeria Pvt. Ltd.

Source: Central Bank of Nigeria (CBN), Proshare

  • Unemployment is likely to increase as tight fiscal and monetary policy could reduce GDP and manufacturing output. Unemployment rate would likely rise from 23.1% in Q3 2018 to 25.1% by the end of 2019.

 

Do feel free to share your opinions/observations and feedback with us vide content@proshareng.com and/or research@proshareng.com

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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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