A new report has tipped Nigeria’s economy to bounce back from recession given some market friendly policy decisions by the President Muhammadu Buhari led administration in recent times which has seen the Nigerian capital market sustained a bullish run in the last three weeks.
The report by United Capital, Nigeria Outlook H2-2017 titled ’After The Rain’, took a cursory look at some of the economic policies rolled out by the government and how they have impacted the country’s economy so far. The financial analysts believe that the signs are indicating positive progress and gradual walk to economic recovery.
According to them, ”The tides are turning for the Nigerian economy. In contrast to lack of decisiveness in policy actions and absence of pro-market reforms observed in the first 18 months of the Buhari led government, a long list of market friendly policy decisions has come through.
”The situation in the Niger-Delta region has improved significantly as domestic crude production gradually recovers to the psychological 2.0mb/d level. After a series of policy somersaults, the CBN appears to have found a way around the FX market crisis. The economy is poised for a comeback. Investor confidence is strengthening and Nigeria seems to be open for business again.” It says.
The report also warned that measures must be put in place to strengthen the Naira further, noting that despite rising optimism, the performance of Naira assets over H2 ’17 (first half) still hinges on a mix of factors. “For equities, the sustenance of recent positive momentum means that the improvement in the policy environment must outpace that of Q2 17. To this effect, macroeconomic variables may have to outperform estimates resulting in corporate earnings surprises while shocks in the system stay rather soft.”
On the capital market and its bullish trend, the financial experts hold an optimistic view that the market has the potential to push the All Share Index above 38,000 points, in this second half of 2017, the closest to the pre-crisis index level in 2014.
“If these assumptions hold true, our bull case scenario sees a 41.4% y/y return by FY17. Our less optimistic view factors in the fact that valuation may cap further uptrend notwithstanding sustained stability in the policy and macroeconomic environment.”
The report however maintains that GDP will rebound but remain sub-optimal and moderation in inflation rate may be weighed by higher food prices even as unsteady oil prices keep investors on the lookout.
Nigeria economy is expected to rebound to positive if government policies remain stable and consistent, and if macroeconomic variables further strengthen with Q2 17 & Q3 17 GDP numbers, the economy will be out of the trough.
