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2015: Experts predict double digit inflation, weaker Naira ahead

By on July 13, 2013

With the political crisis looming in the Nigerian space, experts say the days leading to the 2015 poll are indeed hazy for the nation’s economy, especially with key indicators on the plunge.

A quarterly publication by London-based analysts at Standard Chartered Bank, a copy of which was made available to our correspondent noted Nigeria’s political cycle, the slowing economic growth and intensified spending ahead of the 2015 elections.

According to the report authored by Razia Khan, Regional Head of Research, Africa at StanChart, while GDP growth could stagnate at 6.6 per cent this year, like 2012, it would increase by 7.4 per cent in 2014.

The Naira is projected to exchange at N159 to the US$ by this year, but fall to N163/$ as the election year kicks in and the Central Bank of Nigeria (CBN) slowing down in its defence the nation’s currency against external pressure.

The report also projects that while the Monetary Policy Committee of the CBN would continue to retain the benchmark Monetary Policy Rate (MPR) at 12 per cent this year, it may rise to 14 per cent next year, just as the Consumer Price Index which stood at 12.2 per cent last year, is forecast to close 2013 at 9.2 per cent, before rising to 11.0 per cent by 2014

According to Khan, “we expect inflation to remain in single digits until the end of 2013, allowing the monetary policy rate (MPR) to remain unchanged at 12% this year. Although many had predicted a greater risk of easing following the achievement of single-digit inflation, recent pressure on the Nigerian Naira– given market expectations of a tapering of QE (Quantitative Easing in the U.S.) – as well as concern about Nigeria’s political cycle and spending pressures, will likely keep the monetary policy committee on hold.

The situation, StanChart said, is worsened by the weakening oil output relative to ambitious budget targets, especially as the Federal Government repeatedly dips into the excess crude reserves for help.

“With only modest spending increases envisaged in 2013, a budget deficit of 2.17 per cent was initially forecast. However, oil production, reportedly averaging 2.1 to 2.2 million barrels per day (mmbd), has fallen short of the 2.53mmbd assumed in the 2013 budget.

“In June, output may have hit a low of 1.9mmbd. This has necessitated more frequent augmentation of revenue from Nigeria’s Excess Crude Account (ECA), the “unallocated” earnings belonging to the three tiers of the Federation. Dipping into oil savings to finance spending may result in a narrower budget deficit for 2013,” the report added.

 

 

[Daily Independent]

One Comment

  1. Belinda Jackson

    July 13, 2013 at 9:05 am

    nigeria as a country has failed,can you imajine what the head of fire service is doing to his staffs,they hav been taken out of their jobs unjustifiably,and the president isnt doing anytin about it,this are peaple who hav served the country for mothan 3 decades,it cant happen anywher in d world,i urge the president to check on the matter…his name is Okebiorun