- Some foresee obstacle in domestic variables
- Others see hope in savings, increased oil output
As government continues to assure Nigerians that the economy is technically out of recession, several economists, in their analyses, are divided on projections of the expected growth of the nation’s Gross Domestic Product.
While some say Nigeria’s total investment as a percentage of the GDP, now estimated to grow at 14.80 per cent by 2022, is achievable, others argue that the nation’s economic barometer still lacks developmental strategy to aid the GDP growth rate.
Speaking on the topic, “Deepening the Nation’s Capital Market for Economic Growth’ at the annual workshop for Capital Market Correspondents Association of Nigeria in Lagos over the weekend, the Vice President and Divisional Head, Corporate Planning, Financial Markets Dealers Quotations, an over-the-counter securities exchange, Ms. Kaodi Ugoji, explained that Nigeria accounted for 15 per cent of Africa’s total GDP and ranked 17th in GDP per capital (in Africa) as the country’s real GDP growth’s forecast for 2018 is 2.50 per cent.
“The capital market is an important medium to channel long-term savings into investment in the real economy; it involves a complex interaction between investors, issuers and intermediaries, by mobilising domestic and foreign savings, which can be channeled to sustainable private-sector investment and long-term economic growth,” Ugoji appraised.
We know that even the Niger Delta militants are threatening again that they may resume bombing; so, that is a major threat to the oil production volume. Once we begin to see growth in the oil and gas sector, which has been on the decline, then the economy should continue to grow
The Managing Director, Financial Derivatives Limited, Mr. Bismarck Rewane, admitted that though it was applaudable to predict Nigeria’s total investment as a percentage of the GDP growth rate, expected to leap by 14.80 per cent by 2022, the economy was all the same, vulnerable to many domestic and exogenous variables.
“One major risk is the exchange rate falling below a particular level, and we are leaving the question of growth, the question of output and the question of economic activity, and those things are potent. It is one-dimensional diagnosis, as exchange rate is a critical variable,” he said.
‘PROJECTION UNREALISTIC, NOTHING HAS CHANGED’
However, an investment banker and capital market analyst, Mr. Wale Gbolahan, explained that, looking at the GDP from a positive angle, it was true that the Nigerian capital market had transformed into a more vibrant trading field for capital market instruments from the elementary market but that there was still a long way to go, as development had been affected by a number of factors.
He said, “The capital market still lacks developmental strategy to aid the GDP growth rate. The importance of a strong and viable domestic capital market as an alternative source of finance in emerging economies has been affirmed by the success it has enjoyed in countries such as Brazil, Malaysia, Russia, India and China.
“With government economic reforms running at full throttle, prospects are high for the sustained development of the Nigerian Capital Market as a viable tool for driving Nigeria’s economic growth.”
A professor of Financial Economy, University of Uyo, Akwa Ibom State, Mr. Leo Ukpong, said that most countries, except Nigeria, that had successfully leveraged on the capital market for economic growth had similar characteristics, some of which are: large domestic investors’ base, developed infrastructure and macroeconomic stability, among others.
“Nigeria must, therefore, implement some of these initiatives in order to further deepen its capital markets for economic growth,” he said.
The Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, argued that nothing fundamental had changed about the Nigerian economy, to give one the assurance of a sustained growth or recovery.
He said the recovery of the economy so far was largely driven by the price of crude oil and volume of oil production, which he described as major risks.
“We know that even the Niger Delta militants are threatening again that they may resume bombing; so, that is a major threat to the oil production volume. Once we begin to see growth in the oil and gas sector, which has been on the decline, then the economy should continue to grow,” he added.
Meanwhile, the Monetary Policy Committee of the Central Bank of Nigeria had cautioned that the economic recovery could relapse into a more protracted recession if strong and bold monetary and fiscal policies were not activated immediately, to sustain it.
However, the National Bureau of Statistics had in the third quarter of 2017 put the country’s GDP growth-rate at a 1.4 per cent increase. This is the second consecutive positive growth since the emergence of the economy from recession in the second quarter of 2017.
The NBS in the report said the 1.4 per cent growth rate in the third quarter was higher than the revised figure of 0.72 per cent recorded in the second quarter of this year. In nominal terms, the NBS put the third quarter aggregate GDP at N29.45 trillion, higher than the N26.53 trillion nominal GDP recorded in the corresponding third quarter of 2016.
It stated, “We project that the 2017 current account balance will post a surplus of 0.2 per cent of GDP from an estimate of -0.6 per cent in 2016, even as terms of trade improve. This should increase foreign exchange liquidity to support a more flexible exchange rate regime, thus narrowing further, the gap between the official and parallel market rates.
“As expected, the oil sector contracted sharply by 13.7 per cent, a reflection of lower oil prices and massive shortages in oil production. Agriculture, Information and Communication, and Education emerged as the best performing sectors with respective year-on-year growth of 4.1 per cent, 3.9 per cent and 1.4 per cent; while the Power, Mining and Real Estate sectors were the worst hit, declining by 15.0 per cent, 13.6 per cent and 6.9 per cent, respectively.”
Also, it noted that since the rebasing of GDP series, the economic structure of Nigeria had shown increased diversification with oil becoming less relevant (8.4 per cent of GDP), but only from an activity perspective. The oil sector remains the predominant source of fiscal and export revenues. This suggests an increasing linkage between the oil and non-oil sectors in particular, through the exchange rate
channel.
