The economy will improve in Q4 –Analysts
The macro-economic situation of Nigeria could improve in the fourth quarter of the year only if the harmony between the fiscal and monetary authorities remains stronger.
This was the view of analysts at Cordros Capital at the weekend amid reports that Nigeria may be heading for a second round of recession as indications with a deficit financing of its revised N10.51 trillion 2020 budget rising to N4.563 trillion from N1.847 trillion earlier projected.
This can be attributed to the outbreak of COVID-19 pandemic, which disrupted global economic activities from institutions of lockdowns, together with its passthrough impact on domestic economic indices.
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According to a report from FBNQuest titled, “FBNQuest Q2 2020 Economic Outlook”, the cost of containing the COVID-19 pandemic and oil price crash will have a dent on the economic activities in Nigeria.
The report says: “The recession this year will be smaller than in advanced and many peer economies because of the limits to Nigeria’s integration within the global economy. For the same reason its U-shaped recovery in 2021 is likely to disappoint. Household demand remains squeezed”.
However, Cordros Capital, in an emailed note sent to Daily Sun, says it was not surprising that Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI), both of which constitute 77.3 per cent of total flows, moderated by 39.4 per cent y/y and 13.4 per cent y/y, respectively which was contained in the Capital Importation report released by the National Bureau of Statistics (NBS).
It adds:“For the next few quarters, the trajectory of pull and push factors are central in framing our outlook for flows. On the pull side, emerging markets have experienced record portfolio outflows in recent times, larger than during any recent crisis, including the global financial crisis. The blend of the global COVID-19 shock and a significant drop in oil prices led to record-breaking outflows, especially in March ($82.00 billion).
“For us, the recovery in flows will most likely follow the full resumption of economic activities towards the tail end of the year, which Nigeria should benefit from. On the domestic front, while we expect macroeconomic milieu to deteriorate further, the stronger harmony between the fiscal and monetary authorities should pave the way for a gradual pickup by Q4-20. Hence, we expect capital inflows to ride the wave of stronger economic prospects by Q4-20”.
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