Going by official figures, the outgoing year recorded a number of improvements on the economic front no brainer forex the previous year. Helped by recovering crude oil prices and higher oil production, the year witnessed the return of the economy to positive GDP growth trajectory after a debilitating recession that spanned five quarters in a row. But it was not all cheering news in 2017.
Reflecting the low growth environment and exposure to the oil and gas sector, the banking industry’s solvency ratios declined from about 15 per cent to 10. 5 per cent between December 2016 and October 2017. Non-performing loans in the banking sector rose to 15 per cent as of October 2017 well ahead of the CBN’s regulatory threshold of five per cent. According to my crystal ball, economic performance in 2018 will be a marginal improvement over 2017.
Because government revenues are still highly dependent on the oil sector, it is a no brainer that the performance of the economy in the New Year will be powered by the outcomes in the international crude oil market. Whichever way the present crisis is resolved, the negative effects of the current fuel scarcity will likely linger into the first quarter of 2018. Headline inflation, which is beginning to prove sticky downwards, will spike in January. Monetary Policy Rate at 14 per cent, Cash Reserve Ratio at 22.
The 2018 budget will be ready for implementation in the first quarter of 2018 but full implementation is not likely to commence till the end of this quarter. The level of capital importation, comprising mainly portfolio investments, will not be significant relative to the third and fourth quarters of 2017 since foreign investors are likely to adopt a wait-and-see attitude during this period. Expectedly, the stock market will largely be bearish. The economy will be at a cruising point during the second and third quarters of 2018. Much of the expansion in economic activities will occur during this period. The IMF has forecast a real GDP growth rate of 2. 1 per cent for Nigeria while the Federal Government’s target is 3.
5 per cent as contained in the 2018 budget. Real GDP growth for 2018 will lie somewhere in-between. Consequently, I predict that the MPC meeting of May 2018 will signal an easing of monetary policy through a reduction in the MPR. The World Bank’s Ease of Doing Business report that will be released about this time will show a further improvement in the ranking of Nigeria. Not surprisingly, the level of capital importation will likely peak in the third quarter of 2018. The stock market will be bullish, buoyed by the faster rate of economic expansion and the release of impressive half-year results of many quoted companies. Turbulence, from hyper political activities, will likely set in during the fourth quarter of 2018.