Nigeria Sees 2% GDP Growth in 2021; Inflation to Moderate in 1H

Nigeria expects growth in gross domestic product to reach 2% next year, the central bank Governor said.

Inflation in Africa’s biggest nation, which stood at 14.2% in October, should begin to “moderate by the first half of 2021 as efforts are being made to enable significant cultivation and production of key staple items during the dry season,” Governor Godwin Emefiele said at a conference in Lagos on Friday. “We are working very hard at this.”

The country is expected to finally exit its second recession in less than four years in the first quarter of next year, according to the Governor.

“We are doing very well and there is no need to panic, just like in 2016 when we were in a recession and we exited it, we remain very positive that we will easily surmount this challenge,” he said.

‘Don’t Worry’

Nigeria’s foreign exchange reserves, which stand at over $35 billion, will “cover eight months of imports of goods and services, so there is no need to worry,” Emefiele said.

The naira weakend to 495 per dollar on Friday in the parallel market, the lowest since February 2017, thereby widening the gap with the official rate of 379.50 to 30%, according, a website that collates street rates in Lagos. An average turnover of about $150 million is now recorded on the foreign-exchange window for investors and importers, also known as Nafex, according to the central bank’s head.

The Abuja-based top lender has continue to implement “a demand arrangement framework” in the foreign exchange market to spur local manufacturing capacity and conserve its external reserves. The policy implementation by the bank has led to an improvement in the performance of the Nigerian stock market, which rose 65% between April and November as local investors took positions in fundamentally sound stocks.

Due to the unprecedented nature of Covid-19 shocks, the lender’s regulator “has continued to favor a gradual liberalization of the foreign exchange market in order to smoothen exchange rate volatility and mitigate the impact which rapid changes in the exchange rate could have on macroeconomic variables,” Emefiele said.

©2020 Bloomberg L.P.

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