Nigeria’s recovery from recession in 2021 will be weak ― Analysts

Nigerians have been warned to expect a weak economic recovery in 2021 following predictions by analysts that Nigeria will go back into recession before the year ends and recovery next year will likely be weak, especially in the face of the likelihood of the nation’s economy contracting more by minus three per cent.

A Senior Economist with FBNQuest Capital Research, Chinwe Egwim, made this known in Lagos, on Thursday, during a virtual interaction with newsmen, reiterating that judging from latest data from the National Bureau of Statistics (NBS), the country will have a recession in 2020 and a weak recovery next year.

“The latest data from the NBS show that GDP contracted by -6.1 per cent year-on-year (y/y) in Q2. The oil economy contracted by – 6.6 per cent y/y while the non-oil economy contracted by -6.1 per cent y/y. Headline inflation currently at 12.82 per cent while food price inflation rose by 15.18 per cent y/y to 15.48 per cent,” she said.

Egwin added that in addition to the enhanced credit availability, the Federal Government’s proposed spending and its borrowing plans provide a little comfort for the macro story and spending will be trimmed in the likely event that revenue collection falls short of the heady target set, which the Federal Government projects at N10.8 trillion even as its capacity to prime the pump is substantially lower than that of its peer governments in an emerging market.

According to her, the prospects for GDP might be in form of a double-digit contraction in the oil economy in 2020 but “when the population is growing at up to three per cent annually in the absence of a nationwide famine, it is difficult to see more than a token contraction in agriculture.

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“In the non-oil, non-agriculture economy, which represents about two-thirds of GDP and there are sectors that should perform reasonably in current circumstances alongside the strugglers and the unpredictable. We, therefore, have the economy contracting at a little more than -3 per cent this year.”

The company’s Vice President on Alternative Investments, Christian Ekpo, had earlier stated that the company, which is the merchant banking and asset management arm of FBN holdings had invested over N20 billion in about 70 companies and assets across portfolios in private equity since 2003, adding that they partner with their portfolio companies to deliver growth.

“We partner with our portfolio companies in delivering growth, capital and providing value creation support through revenue enhancement, margin improvements and capital efficiency. Our asset mix consists of investments in real estate, direct private equity investments, venture capital funds and third party managed equity,” he stated.

Also speaking, FBNQuest Research Analyst, Tunde Abidoye, said given the volatile environment, cuts and deferment of capital expenditure plans and firms are expected to pursue operating expenses cuts in line with government directives.

According to Abidoye, companies and entities are still vulnerable to any macro shock in the environment as fragility still exists, adding that, “banks have structured about 40 per cent of loan books but the possibility of these loans still existing is there despite forbearance packages.”

Abidoye urged investors to stake their funds in blue-chip companies that would withstand macro-economic shocks.

NIGERIAN TRIBUNE

Nigeria’s recovery from recession