Analysts Optimistic about Nigeria's Economic Recovery


Obinna Chima

Some financial market experts have expressed optimism that the Nigerian economy would soon record positive growth.

The experts, who spoke in separate interviews with THISDAY, also urged the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) to commence gradual easing of monetary policy from its next meeting.

Nigeria’s first quarter of the year (Q1 2017) Gross Domestic Product (GDP) report released by the National Bureau of Statistics Tuesday, showed that Nigeria’s GDP contracted by 0.52 per cent (year-on-year) in real terms, indicating five consecutive quarters of contractions since the Q1 2016.

Also, the MPC on Tuesday left all its key monetary policy tools unchanged at the end of its meeting.

But in his response to the MPC decision, the Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said it was a case of “when in doubt, do nothing.”

According to Rewane, the MPC members, in their wisdom felt it was too early to make any dramatic change in its monetary policy direction.

“What I would say is that they did not disappoint anybody. But at the same time, they did not excite anybody,” he added in a telephone chat.

Reacting to the performance of the economy in the first quarter as reflected by the GDP figures, he said: “GDP figures are moving in the right direction. But it only confirms our view that it is going to be a slow and painful recovery; and that there are no quick fix.

“The only way to enhance this recovery is to actually make credit available to the real sector to stimulate economic activities. That would not be possible with the current interest rate regime. So, the MPC needs to take some aggressive steps to support the recovery. The bold thing to do would have been to move, but the wise thing to do was to wait a little bit to see what happens next,” he added.

To the Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, the MPC outcome was expected, saying that a lot of analysts had predicted that interest rate would be retained, knowing the mindset of the central bank as regards inflation and exchange rate.

“So, what the MPC did was not a surprise to us. But from our perspective, we would like to see a better interest rate regime. We feel the current interest rate is too high for businesses. But the position of the CBN is that relaxing its tight monetary policy would pose a risk to inflation.

“But our view is that under the prevailing interest rate regime, businesses would find it very difficult to succeed. But the good thing is that we have seen some improvement in foreign exchange policy regime, which is a consolation for us. So, gradually, we hope they would get to a point where they begin to relax the monetary policy condition,” the LCCI boss explained.

Commenting on the first quarter GDP figures, Yusuf said what it showed was that the economy was on the path of recovery.

“So, we are moving close to the positive territory. I am optimistic that the GDP would get to the positive territory by next quarter,” he added.

According to him, some of the improvement in policy in recent time, the results would manifest in the second quarter GDP.

He listed some of the policies to include improvement in foreign exchange, Ease of Doing Business, the Executive Orders, amongst others.

Also, Research Analyst for FXTM, Lukman Otunuga, in a note yesterday, pointed out that the first quarter 2017 GDP “still remains the best performance seen in four quarters.”

“With many sectors of the Nigerian economy turning positive, the overall outlook still looks encouraging with the bullish impacts likely to be realised in the second and third quarter of this year.

“The Central Bank of Nigeria has made the logical decision to maintain key interest rates as the nation stabilises and continues its ongoing quest to diversify beyond relying on oil exports. With Nigeria’s GDP for the first quarter of 2017 still in recessionary territory, the damage of depreciating oil prices still lingers on with s