Business activity will likely be muted in the first half of 2019 amid elections in Nigeria, but things would take a turn for better once that is over.
The general elections are scheduled for February 16, 2019 and could be coloured by a smooth transition or disruption, either of which will impact businesses.
Major factors constraining business activities currently include insufficient power supply, which stood at 64.0 index points, high interest rate 57.5 points, unfavourable economic climate 54.3 points, financial problems 53.4 points, unclear economic laws 52.0 points, unfavourable political climate 47.5 points and insufficient demand 42.9 points, the CBN’s business expectation survey for December 2018 indicated.
Nigerian economy in 2019 is projected to grow by 2% by the International Monetary Fund (IMF); 2.2% by the World Bank; and 2.28 percent by The Central Bank of Nigeria (CBN).
All economic indicators as analysed by Nigerian economists are expected to bounce back in the fourth quarter of 2019.
Doyin Salami, a renowned economist and former member of Central Bank of Nigeria’s monetary policy committee, said businesses should keep close eye to oil production and prices in 2019.
He gave a baseline projection for oil price in 2019 to stand at US$61.0 per barrel (NYMEX Futures 12 average), optimistic of increase in oil price to US$65.0 per barrel and pessimistic of a decline to US$56.0/bbl.
His baseline projection for oil production in 2019 is 2.0mbpd, optimistic 2.1ombpd and pessimistic 1.8mbpd.
Speaking with BusinessDay after moderating a panel session at the Nigeria-British Chamber of Commerce in Lagos on Thursday, Abiola Adekoya, CEO, RMBN stockbrokers Limited, “. I think it is very good to hear actionable strategies that businesses could adopt and also from economic point of view what the key traders or pressure points they must look out for and in order to manage their businesses effectively to hedge the impact of those triggers on their businesses”.
In his analysis, Marcel Okeke, former Chief Economist/group head, research and Economic Intelligence Group, Zenith Bank Plc. and Current lead consultant, Mascot Consult Limited said there would be renewed focus on policies to drive growth in the fourth quarter of 2019.
On foreign exchange, Okeke projects the naira to trade between at N375/$ – N380/$ in the fourth quarter of 2019 from between N360 and N364 trading currently.
FBNQuest said its outlook report that the CBN will maintain the preferential rate for priority transactions, and that the NAFEX rate will weaken to a range of N375 to N385 per US dollar.
“On the naira exchange rate, we are in the minority position of seeing no substantive change this year. We know that the CBN governor’s five-year term ends in June. It is unclear at this stage whether or not his term will be extended, whatever the election result”, analysts at the FBNQuest said.
According to the analysts a change at the top does not necessarily translate into change across the bank. Its officials favour management of the exchange rate, however discreet, and have no experience of a rate genuinely driven by market forces.
The CBN’s survey report show that majority of the respondent firms expect the naira to appreciate in the current and next months as the confidence indices stood at 22.3 and 35.4 points, respectively.
HOPE MOSES-ASHIKE
