Momentum in the Nigerian economy remained at a snailâs pace in 2019 despite increased clarity in the political space. While issues surrounding the 2019 general election subdued economic activities in Q1-2019, investment and business decisions were hushed by policy uncertainty and incoherent policy pronouncements In the remaining part of the year.
As such, output growth remained at the recovery phase, projected at 2.2 4% for F Y-2019. Though the headline inflation rate moderated significantly, consumer spending remained weak. Also, actual government revenue continued to underperform budget estimates (at N2.0trn v s N2.9trn), thus constraining spending. As such, the fiscal deficit remained elevated, keeping the cost of capital high and necessitating direct central bank financing of the government. Monetary policy stance was largely unconventional as the Central Bank of Nigeria (CBN) opted to focus on domestic liquidity management via increased OMO sales, exclusion of non-banking institutions to force down rates while compelling Deposit Money Banks (DMBs) to lend to the real sector.
In 2020, the outlook for the Nigerian economy hangs on a framework of a well-intended but slightly uncoordinated policy outline. Notably, the recent amendment of the Deep Offshore and Inland Basin Production Sharing Contract (DOIBPSC) 1993 Act and the ongoing reviews of the Tax Acts via the finance bill, will support the implementation of the 2020 Budget and beyond in the face of sharp rising debt profile. Again, the unprecedented early passage of the 2020 budget by the senate in Dec-1 9, to return the economy to a January to December budget.
Â Â United Capital Research