Citing “waning base effects,” Financial Derivatives Company (FDC) has projected a Gross Domestic Product (GDP) growth of 3.5 per cent for Nigeria in the third quarter of this year.
The firm, which stated this in its Lagos Business School (LBS) Executive Breakfast Session presentation, released at the weekend, also forecast a GDP growth of 3.2 per cent for the country in Q4’21.
According to the National Bureau of Statistics’ (NBS) calendar, Q3 GDP data will be released on November 24. Following its exit from a COVID-19-induced recession in the fourth quarter of last year, the nation’s economy had recorded GDP growth rates of 0.51 per cent and 5.01 percent in Q1 and Q2”21 respectively.
However, according to the Bismarck Rewane-led FDC, “waning base effects (will) impact GDP growth rate” in Q3 and Q4.” The firm stated that while macroeconomic fundamentals were improving, indicators point towards a slow recovery for the economy.
It noted that while inflation declined for the sixth consecutive month on base year effects, monthly inflation is increasing, suggesting that inflation risks are elevated. FDC also pointed out that although the country’s external reserves have been heading north due to higher oil proceeds and forex inflows from Eurobond drawdown, “currency pressures persist despite increased dollar inflows.” The firm, which also noted that the Purchasing Managers Index (PMI) is declining and power supply from the grid is falling, stated that strategic investments would be key to Nigeria achieving inclusive growth. On inflation, FDC said it was forecasting that inflation would drop further to 16.31 per cent in October from 16.63 per cent in September , adding, however, that “headline inflation likely to continue its downward trend in Q4, but at a slower pace; monthly inflation to increase, further reflecting price pressures.” New Telegraph reports that the NBS has projected real GDP growth of 2.5 per cent for Nigeria this year. In its latest World Economic Outlook (WEO) released last month, the International Monetary Fund (IMF) raised Nigeria’s 2021 economic growth forecast marginally from the 2.5 per cent it had previously estimated to 2.6 per cent. The Fund also reviewed upward the country’s 2022 growth prediction upward from 2.6 per cent to 2.7 per cent.