Analysts at FSDH Merchant Bank have estimated a real Gross Domestic Product (GDP) growth rate of 3.16 per cent for Nigeria in 2018.
In addition, the Lagos-based firm also projected an ambitious growth rate of 4.09 per cent for the country in 2019.
FSDH Merchant Bank made the forecasts in its 2018 economic projection that was obtained on Monday.
Although the fourth quarter 2017 GDP figures are yet to be released by the National Bureau of Statistics (NBS), the Nigerian economy had grown by 1.4 per cent in the third quarter (Q3) of 2017, effectively doubling the revised growth rate of 0.72 per cent recorded in the second quarter of the year.
The FSDH Merchant Bank forecast for 2018 was slightly higher than the forecast of the World Bank and International Monetary Fund (IMF) of 2.5 per cent and 2.1 per cent respectively.
However, the firm explained in its latest report that with the population growing at 2.75 per cent, the country requires growth rate in excess of five per cent to substantially improve the well-being of Nigerians.
“Agriculture, Trade, and Mining & Quarrying sectors, with forecast growth rates of four per cent, two per cent and 3.2 per cent would drive the 3.16 per cent growth rate in 2018. Other leading sectors of the economy that would contribute to the growth are: Information and Communication (I&C): 2.2 per cent; Real Estate: 2.5 per cent; Construction: four per cent and Manufacturing: one per cent.
“Agriculture, with a growth of 3.06 per cent; Mining and Quarrying: 25.44 per cent and Other Services: 1.72 per cent were the three leading sectors that contributed to the growth rate of 1.40 per cent recorded in Q3 2017,” it added.
It noted that the increase in the supply of foreign exchange has improved economic activities across other sectors of the Nigerian economy.
FSDH Research stated that it had observed increased activities in Agriculture, Mining and Quarrying (oil and gas), manufacturing, Trade, Real Estate and I&C in the last few months, adding that thegrowth in the equity market has created additional wealth that would stimulate effective demand in the economy.
“Some light manufacturing activities are also taking place – stimulating demand for raw materials from Agriculture. The current oil price will encourage investment activities in the oil and gas sector. Trade sector would also benefit from the increase in consumer purchasing power
“FSDH Research notes that there are downside risks to the forecast growth. The rising social unrest in some parts of the country may affect economic activities and lead to escalating inflation rate. A significant drop in oil price may also have negative impact on the growth prospect.
“FSDH Research will highlight the implications of the GDP growth forecast on businesses and financial market in our next week article,”
The IMF had explained in its World Economic Outlook released Monday that the pick up of growth Africa (from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019) was broadly as anticipated, with a modest upgrade to the growth forecast for Nigeria but more subdued growth prospects in South Africa, where growth was expected to remain below one per cent in 2018–19, as increased political uncertainty weighs on confidence and investment.
Also, the IMF stated that fiscal policy was generally constrained by the need to gradually rebuild buffers, especially in commodity-dependent emerging market and developing economies. With the recent respite provided by the cyclical rebound in commodity prices, it urged policymakers to guard against the temptation to defer reforms and budgetary adjustments for later.
“The policy challenges for low-income countries are particularly complex, as they involve multiple, sometimes conflicting goals. These include supporting near-term activity; diversifying their economies and lifting potential output to maintain progress toward their Sustainable Development Goals; building buffers to enhance resilience, especially in commodity-dependent economies grappling with a subdued outlook,” it stated.