Analysts at United Capital Plc. have estimated that the Gross Domestic Product (GDP) of Nigeria will see a 3.1 percent growth year-on-year in 2021.
It noted this in a forecast report shared over the weekend, where it said that the current state of instability in the country would disrupt economic activities in Nigeria.
It added that the payment of subsidies that continues to see an uptick remains a burden on the Federal Government coffers.
The report said, ‘‘Looking ahead, a myriad of factors will shape the trajectory of the Nigerian economy in H2’21. First, developments around Covid-19 infections and vaccination rates will determine if economic growth garners pace.
“First, developments around Covid-19 infections and vaccination rates will determine if economic growth garners pace. Also, the success of the Federal Government, FG’s external debt issuance plans be critical for the, FG’s ability to finance its budgetary obligations and for improved USD flows, stronger e Foreign Exchange, FX reserves and consequently, the exchange rate.
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“The subsidy program, which is expected to last till Oct-2021 is also key to watch as the rising cost of subsidies (estimated at over N100.0 billion/month) continue to weigh on FG’s finances.
“Furthermore, the Monetary Policy Committee (MPC) will be meeting three times before the end of H2-2021. The committee’s decision on the monetary policy rate at these meetings would be a key factor to watch in the second half of the year.
“Overall, we raise our Gross Domestic Product, GDP forecast for 2021 to 3.1 percent Year on Year, y/y from our prior forecast of 2.1 percent y/y, with rapid economic growth of 7.4% y/y and 4.4 percent y/y in Q2’21 and Q3’21.
“The upward adjustment to our GDP forecast reflects the faster than expected recovery in economic activities, as well as the low base impact of 2020.
“Despite continued inflationary pressures, we expect the high base effect of H2’20 to create an inflection point for consumer prices, causing the headline rate to continue trending downward.
“Lastly, we expect to see sustained stability in the FX market as oil prices are expected to remain strong while the upcoming Eurobond issuance is expected to support external reserves. Certainly, downside risks abound, mostly tied to the key factors highlighted above, but also due to the rising insecurity bedeviling the country.”
