Although COVID-19 vaccinations and the uptick in oil prices may have given a boost to the Gross Domestic Product (GDP) outlook for Nigeria in 2021, financial experts at Comercio Partners Asset Management say thaT they are maintaining tepid expectations on the country’s economic growth this year due to concerns over rising inflation.
The experts, who stated this in a report obtained by New Telegraph at the weekend, said that while they expect the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) “to keep playing down the current inflationary pressure,” they believed there would be a shift in policy posturetightening if prices continue to rise.
They stated: “We expect MPC to keep playing down the current inflationary pressure, which, to a great extent, remains supply-side driven, since tightening would expand the costs of capital and hinder venture and individual investments expected to support recuperation of the debilitated economy.
“Additionally, we consider a dovish decision both unrealistic and far-fetched in the short to medium term as this might be terrible for the country’s currency. We however do not totally preclude tightening in the short to medium term as any hit to the exchange rate could lead to a frantic move to draw in more greenback.
“The quicker than expected availability of COVID-19 vaccines in Nigeria, as well as the sustained uptick in oil prices, brightens the GDP growth outlook for 2021.
The 2.5 per cent growth projection by the IMF sits slightly above out earlier posited GDP growth range of 1.5 per cent and 2.4 per cent, but remains shy of the three per cent growth target embedded in the 2021 Appropriation Act.
“Nevertheless, we maintain tepid expectations on Nigerian’s economic growth for 2021, as we foresee a shift in policy posture to curb inflation, and we also remain concerned about the pre-existing structural issues.”
The experts said that inflation will likely continue to head north, given that “the insufficiency and disruptions to food supply will continue to have a notable effect on prices.” They also cited “the passthrough effect of increased energy and PMS prices on the production cost of businesses and the pockets of individual consumers.”