The Central Bank of Nigeria (CBN) would likely increase the number of items it bans from accessing foreign exchange from its official window in the new year if pressure continues to mount on the Naira, analysts from GTI Securities have predicted.
In their projections in the Nigeria Economic Look for 2020, the analysts believe the country’s inflation rate would accelerate to 12 per cent if its borders are not reopened by the end of January 2020.
They, however, forecast that the presidency would likely reopen the Nigerian land borders before the end of the first quarter to avoid missing out of the benefits of the African Continental Free Trade Area (AfCFTA).
They also reasoned that accelerating inflation rate may force the apex bank to raise the Monetary Policy Rate (MPR) to 14 per cent.
The country’s benchmark interest rate is currently pegged at 13.5 per cent.
GTI Securities’ analysts were of the opinion of that National Assembly expected to approve FG’s $29.9 billion foreign loan request and the country would make some progress on P&ID legal battle but will part with some fortunes.
They believe that the government will bring more of its agencies into the Integrated Payroll and Personnel Information System (IPPS) and Treasury Single Account (TSA) for fiscal prudency.
“GDP growth to remain weak due to unaligned fiscal and monetary policy focus, and over-dependent on crude oil as the main source of FX. Hence, we expect GDP growth to settle between 2.10% – 2.40 per cent,” they noted.
Other highlights of the economic outlook are:
Returning to January – December budget cycle to boost business planning and investment intents
Equity market to witness modest recovery; driven by low yields in the fixed income market (vs.
high inflation rate), dissipation of political risk, and expectation of improved budget implementation
Bond yield might gain traction (modest) by early Q2’ 2020 as FG will need to repay c.₦500bn on maturing bond instruments • Power tariffs may likely be reviewed upward to reflect current-cost realities • Mass industrial action likely to go down in many states (in H1’2020) over inability to pay the new minimum wage
Insurance sector & Microfinance banks recapitalization directives will reduce number of players due to need for mergers & acquisition. Nonetheless, the surviving ones will be stronger and more liquid
CBN may push for banks recapitalization over Moody’s recent report which downgrades Nigeria banking sector long-term rating to “Negative” from “Stable”
Naira value may depreciate if oil price slide by more than 10% below $55/bl