Nigerian economy will maintain a positive growth trajectory that will enhance corporate performance and deliver better returns to investors in the next three quarters.
In its “Economic Review Report” released yesterday, GTI Securities stated that all indices point towards positive economic outlook for the economy generally and the stock market particularly.
According to the report, notwithstanding the continued challenges in the global economy as result of continued escalation of trade war among major economies, the Nigerian economic environment is expected to maintain trajectory witnessed in the first quarter of the year.
The report predicated its positive outlook on improved labor market, private investment, accommodative monetary policies and more stable commodity prices.
Analysts at GTI Securities stated that they expected the positive economic environment witnessed in first quarter to continue into the second quarter of the year.
“We expect to see lower inflation reading in second quarter 2018. This will be bolstered by the Central Bank of Nigeria (CBN) unmitigated commitment to deflating any pressure on price stability. We also expect to see an improved first quarter Gross Domestic Products (GDP) reading as result underlying economic indices. The above forgoing is expected to have a positive impact on companies’ performances, thereby boosting activities on the Exchange. This may likely led to market re-pricing of quoted stocks. We equally expect to see other asset classes maintaining positive traction,” GTI Securities stated.
Analysts noted that with the significant recovery seen in commodity prices, especially crude oil which is trading at more than $69, economy will post a stellar growth in the year.
GTI Securities premised its optimism on anticipated stronger contribution of the non-oil sector which performed abysmally in 2017 as a result of the gestation period required for some projects initiated in previous years to come into fruition.
“We expect the equity market to consolidate on the growth witnessed in 2017 with a growth of 20 per cent. This will be driven by positive economic environment and increased participation of foreign investors,” GTI Securities stated.
According to the research report, the ease of doing business drive by the government through review of various legislation’s that impedes business activities, improvement on tax administration and coverage areas, increased investment in infrastructure and agricultural activities would provide a boost to the economy.
Analysts, however, cautioned that the major headwinds to the positive economic outlook are the upcoming election season and government’s seemingly low level of budget implementation, warning that it will be in the interest of the sitting government not to sacrifice economic activities for the sake of politics.
The investment firm also expressed worry over delay in the passage of 2018 budget into law as a result of power tussles between the executive and legislative arms and the political season expected to pick-up in the second half of the yaer.
GTI Securities predicted that economy will grow by 2.3 per cent in 2018 based on the estimated anticipated oil production level of 2.2 million barrels per day and average oil price of $55 per barrel.
The report also indicated that interest rate could drop to 13 per cent in the second half of this year from the current level of 14 per cent to reduce cost of capital and boost investment while inflation rate is expected to reduce from the current level of 14.33 per cent to 12.5 per cent.
“We expect the exchange rate to settle at N325 to US dollar at the official market rate. This is in line with our anticipation that the CBN would drive towards a harmonized exchange rate in 2018 in order to allow room for credibility and higher confidence in the system leading to increased participation of foreign investors,” GTI Securities stated.
Source: The Nation