Reviews & Outlooks | |
Reviews & Outlooks | |
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Wednesday, December
13, 2017 / 12:19PM /FBNQuest Research
Out of recession into weak growth
The economy has returned to the growth path,
although not in per head terms and largely due to the recovery in oil output.
Household demand remains soft. The services sector contracted y/y in Q3 2017.
We see growth at just 0.8% this year and 2.1% in 2018, based upon rising crude
production, a fiscal stimulus and investment in pockets of the economy.
Time for fiscal policy to deliver
The FGN is confident that its cumulative
expansionary fiscal policy will bear fruit in 2018 in the form of completed
projects and the knock-on effects. (If it is right, there could be electoral
considerations.) It can also convert the recent Eurobond sales into capital
releases in coming months.
Talk of better revenue collection, too
The data is patchy but it appears that aggregate
revenue collection has picked up steam in 9M 2017. If confirmed, this increases
the FGN’s room for fiscal expansion and delivery.
Stable fx policy in the year ahead
The CBN is rightly pleased with its unorthodox
multiple currency practices. Turnover on NAFEX has gathered momentum and
contributed to healthy growth in reserves, along with better oil revenues and
the fx debt sales. Reserves are heading for US$40bn and above. The CBN is under
no domestic pressure to abandon its practices.
Scope for gentle monetary easing
The monetary policy committee has not changed
stance since July 2016. Yet we see scope for easing as headline inflation is
due to slow in H1 2018 on positive base effects. Independently, the rates on
FGN naira paper are falling on official debt strategy, the early success of
NAFEX and the return of the offshore investor. Happily for the FGN, this trend
has further legs.
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