Nigeria’s economy to continue at tepid pace in 2020- analysts
Financial Analysts have predicted that in 2020 Nigeria’s economy would continue at its tepid pace before it accelerates.
They also pointed out that growth will be constrained by infrastructure challenges such as power shortages, poor rail and road, and port facilities.
In addition to the infrastructure deficit, they said that the country is also faced with insecurity, elevated inflation, and tight credit conditions.
An economist Mr. Ifeanyi Okolo said that it is expected that low oil prices would continue in 2020 and with this, the revenue forecast would be weak even with a projected increase in tax revenue and improvement in tax collection.
He, however, said that in the coming year, the policy measure like a hike in value-added tax, the implementation of the minimum wage and the cost of electricity tariff would be more inflationary.
He said once the government starts payment of new minimum the prices of goods in the market would go up.
Reviewing the nation’s economy, the FDC research report for the month of December said that the year 2020 is poised to be one of economic unpredictability at both the global and domestic levels.
It said that while the US-China trade spat has forced revisions to the global growth outlook, markets will also keep a keen eye on elections in the US and the policy response of advanced economies to a global slowdown.
According to the Economist Intelligence Unit (EIU), Nigeria is forecast to grow at 2 per cent in 2020 – unchanged from 2019.
It pointed out that the current projection remains below the population growth of 2.6 percent and implying that per capita income will fall further.
But the IMF still believes that GDP growth will increase to 2.3 per cent.
The report explained that the high debt-servicing costs leave little headroom for the fiscal authorities to manoeuvre and this has left monetary policy as the main lever to drive an economic recovery.
Describing the monetary policy framework of the Central Bank of Nigeria (CBN) as one of explicit-inflation targeting, it said it has maintained a neutral stance by holding rates unchanged four times in the last year, due to rising inflation expectations and exchange rate pressures.
However, it said it has deployed unorthodox measures to stimulate lending as economic growth becomes a stronger consideration.
This has yielded positive results as a credit to the private sector has risen by over N1.1 trillion since the CBN, in July 2019, mandated deposit money banks to maintain a minimum loan to deposit ratio (of 60% by September 30th, 2019 and then to 65% by December 31st, 2019.
With this policy, Lending rates are declining because deposit money banks scramble to meet the loan to deposit ratio requirement.
The CBN has managed to lower lending rates without reducing the monetary policy rate.
The National Bureau of Statistics in its Selected Banking Sector Data – 2019 disclosed that the profile of non-performing loans has declined from N2.24 trillion in the third quarter of 2018 to N1.1 trillion at the end of the third quarter 2019.
It stated that falling non- performing loans at a time of increased credit to the private sector was an indication that deposit money banks are becoming more innovative in their risk management.