Expert says Nigeria’s economic recovery remains weak

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A financial service corporation, EFG Hermes has described Nigeria’s economic recovery process as fragile as the macroeconomy remains complicated and in need of structural reforms.

The corporation stated that the country’s economy remains plagued by COVID-19, tight foreign exchange (FX) conditions and rising inflation.
According to the March Consumer Price Index (CPI), Nigeria’s inflation rose to 18.17 per cent from 17.33 per cent recorded in February 2021.

According to Hermes, infrastructure deficit remains one of the key challenges in the country to create a sustainable base of economic growth.

In an interview with The Guardian Head, Macro Economy, EFG Hermes, Mohamed Basha, said infrastructure deficit remains one of the key challenges in the country to create sustainable growth.

Speaking on the foreign exchange market, he said, the situation remains tight in the absence of a required adjustment. According to him, the parallel market rate has been stable in the past few weeks but continues to trade at 17 per cent premium to the investors’ and exporters’ (I&E) window.

He said foreign portfolio investors have backlogs in the system while the Central Bank of Nigeria (CBN) continues to impose import controls.

“We think the naira has to see a further adjustment, despite the higher oil prices, as current levels are not market-clearing rates,” he said.
Basha said inflation continues to creep higher in light of increasing food price pressure.

According to him, a combination of deteriorating se curity situation, a weaker naira, import controls and logistical challenges partly due to COVID-19 continue to drive inflation higher with no signs of abating.

“We expect inflation to rise further from the current level, to hit near a decade high of close to 20 per cent in the coming few months. The potential recovery from COVID-19 as well as potential power tariff/fuel price hikes are key upside risks to inflation,” he noted.