Q4 2019 Economic Outlook : A Less Threatening External Landscape

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Wednesday, November 27, 2019 /12:48 PM  / By FBNQuest Research / Header Image Credit: Hindu Business

 

Some Crumbs of Comfort Globally 

The chatter around global recession is less frequent now that the Federal Reserve has indicated time for a pause following three rate cuts. US data releases on measures of labour and consumption have stabilized. Global equity markets have shown their resilience. The mood music surrounding the US-Chinese trade talks could deteriorate, however.

 

Some Benefits For Nigeria Along The Way 

Such an improvement in the global landscape, while modest and if sustained, brings a little comfort to Nigeria by addressing its two largest macroeconomic weaknesses. It eases downward pressure on the oil price and should militate against the flight to quality among foreign portfolio investors (FPIs).

 

A Determination Not To Rock The Boat 

By the same token, the naira exchange rate has a calmer quarter ahead because pressure on its two weak points should abate. The authorities will not want to disturb this relative calm so we no longer see any rate cuts by the monetary policy committee over the forecast period. In this scenario, the CBN holds the line on its exchange-rate arrangements.

 

Growth Slowly Rising Off The Floor 

The usual seasonal boost to demand in the fourth quarter should push growth up to 2.5% or so this year. The other drivers are a small rise in crude output and the FGN's fiscal stimulus (particularly in 2020 with the initiative on calendar and budget years). We should now track credit extension data to see if the welcome acceleration in Q3 is maintained. The CBN feels that it has solved an old problem (and removed a major impediment to growth.)

 

Borders Too Open For Some, Too Closed For Others

Governments should control their own borders. We see the rationale for the FGN's closure and hear anecdotal evidence of a positive impact. More likely, however, it will be reversed under pressure from inconvenienced parties.


Central economic indicators

2017

2018

2019F

2020F

Real growth (in per cent)

0.8

1.9

2.5

2.7

CPI (in per cent; y/y Dec)

15.4

11.4

11.9

12.4

Monetary policy rate (%; year-end)

14.0

14.0

13.5

13.5

Current account/GDP (in per cent)

2.8

1.3

-1.2

0.1

Bonny Light (end-period spot; US$/b)

65

62

65

64

Bonny Light (average spot; US$/b)

54

73

64

63

Official fx reserves (in US$ bn)

39

43

39

38

N/US$ (end-period)

306

307

307

308

N/US$ (average)

306

306

307

307


 

Sources: CBN, NBS, Bloomberg; FBNQuest Capital Research

 

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