August 7, 2017/InvestmentOne Research
§ During the outgone week, the IMF team, upon conclusion of their visit to discuss recent economic and financial market developments, projected a +0.8% aggregate GDP growth for Nigeria in 2017.
§ While the team acknowledges some sign of reliefs in H12017, it highlighted downside risks to ongoing economic recovery. These include delays in policy implementation, possible shortfalls in agricultural and oil production, a reversal of favorable external market conditions among others.
§ Admittedly, the ongoing economic recovery remains fragile given the country’s economy vulnerability to unexpected shock in the oil sector. However, we are of the view that majority of the concerns raised by the IMF team are being gradually addressed.
§ A case in point is the recent move by CBN and FMDQ to improve transparency in the FX market by mandating banks to quote trades among counterparties on Bloomberg terminal. This could further boost investors’ confidence on the working of IEFX window.
§ Furthermore, agricultural sector’s contribution to GDP has always benefited from abundant rainfall. The relatively favourable weather condition coupled with increased support to the sector via the Anchor Borrower Programme could see the sector’s contribution to GDP improves further in this fiscal year.
§ We are also of the view that implementation of fiscal measures such as increase in non-oil revenue is ongoing with proposition to hike tax rate on luxury items as well as widen the tax net.
§ It is instructive to note that these measures cannot be hurriedly implemented as prescribed by the team under present circumstances, bearing in mind the social and political implications of such reforms.
§ While Nigeria’s GDP growth for 2017 may not be substantial as suggested by the bank, we expect support to GDP growth from stability in the oil sector which should drive recovery in other sectors of the economy.
§ Consequently, we see Nigeria’s GDP growth of c.1% in 2017.