Tackle rising uncertainties to keep growth, FSDH advises government
Except the emerging uncertainties associated with 2018 budget, delay in the confirmation of Monetary Policy Committee members and social unrest targeted at the agriculture sector are settled, all positive economic forecasts now may amount to nothing.
A report by FSDH Merchant Bank Limited has noted that some investors are gradually adopting a “wait and see” approach as the delay in both budget passage and confirmation of policy makers lingers, which has adverse effect on the economy, with the Purchasing Managers Index already falling for two consecutive months.
It also noted that long running social unrest that is now affecting agricultural production, may worsen the situation if enters into full farming season, as this would spill negatively into the inflation readings, particularly though the food index.
Head of Research, FSDH Merchant Bank, Ayodele Akinwunmi, while unveiling the Monthly Economic and Financial Markets Outlook tagged: “Growth Prospect with Rising Uncertainties”, said the development has put up three challenges against projected economic indices.
He explained that there is a possibility of capital flight as a result monetary policy normalisation (like hike in interest rate) in the advanced countries, particularly the United States, which is always a huge attraction to investors due to its predictability.
There is also the possibility of a drop in the crude oil price at the international market, but worsen by muted news that the country’s vessels with crude oil are yet to find buyers, a reality that will easily feed into the country fiscal capability.
Akinwunmi also pointed out that any further shortage in food supply and harvest losses will bring increase in food prices, with its attendant unfavourable impacts on inflation rate and interest rate cut expectations.
Noting that FSDH Research maintains a GDP growth rate of 3.16 per cent for the country in 2018, he said that its realization in now subject to quick policy response in dealing with the rising uncertainties in the country.
“FSDH Research observed a slowdown for the Purchasing Managers’ Index (PMI) for the second consecutive month. This was contained in the latest PMI report that the Central Bank of Nigeria (CBN) published for the month of February 2018.
“The Composite Manufacturing Index (CMI) dropped from 59.3 in December 2017 to 57.3 in January 2018 and to 56.3 in February 2018. Although the PMI figures are above 50 points, the slowdown may reflect the rising uncertainties in the country.
Policy makers and economic managers in the country need to pay urgent attention to the declining trend in the PMI in order to nip it in the bud,” he said.
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