Tough year projected for consumers
Rand Merchant Bank, the South African-based financial organisation, was overall downbeat at the country’s economic prospects.
“Unfeasible import substitution, a collapse in export revenue and the resultant Naira depreciation will weigh heavily on the consumer as rampant inflation erodes purchasing power,” said RMB in its latest Global Markets update.
“We expect significant shrinkage in capital formation due to limited resources and believe that policy uncertainty will continue to discourage private sector investment. The contribution of net exports to headline growth will remain muted over the forecast period as Nigeria struggles to diversify its export basket.”
RMB believes Nigeria’s economy will stumble along in 2016, growing at a paltry 3,2 percent as tighter monetary and financial conditions weigh on sectoral growth.
Trend growth for the next five years is estimated at 4,7 percent.
“Nigeria’s rates of expansion, though competitive on a regional basis, are sluggish compared to prior years, signalling a structural slowdown in activity,” said RMB.
On Thursday, an international ratings agency, Fitch, highlighted the downside risks to Nigeria’s sovereign credit profile arising from recent policy responses to the flagging oil price.
In a note, Fitch pointed out that authorities risked eroding fiscal and external policy buffers by increasing borrowing and maintaining an “unorthodox’ foreign exchange policy stance.
Should the agency deem measures to be inappropriate in enhancing economic growth and fiscal sustainability upon review, it will likely downgrade the sovereign which is currently on negative outlook, RMB stated.
– CAJ News
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