Standard Chartered Bank has predicted a stronger economic growth with rising inflation for the global economy in 2018. The bank revealed this in its 2018 Wealth Advisory Report titled Turning up the heat.
Highlights of the report
Global growth is expected to accelerate in 2018 for the second straight year, led by the US and Latin America, while China, Japan and the Euro area stabilise after a strong pick-up in 2017. Standard Chartered expects a modest upturn in core inflation worldwide, especially in the US. We expect the Fed and some Asian central banks to raise rates at a gradual pace over the coming year.
What does this mean for Nigeria ?
Nigeria’s fortunes are tied closely to crude oil prices. As long as global demand remains steady, so also does demand for crude oil. Crude oil prices have recovered from as low as $40 a barrel to nearly $70. Nigeria’s foreign exchange income is majorly dependent on revenue from crude oil.
The stronger global growth, and ensuing inflation could also have a negative effect on the country. If the US Fed (Equivalent to Nigeria’s CBN) decides to increase her interest rates persistently, this could lead to foreign portfolio investors exiting the country. Nigeria’s stock exchange is largely dominated by foreign investors, so an exit would lead to a decline.
The NSE All Share Index was up 42% last year, driven by renewed foreign exchange liquidity, after two consecutive years of negative performance. The bullish performance has continued into the year, with the index up by 15% year to date.
Industries could also bear the brunt of an increase in commodity prices, if global growth eventually becomes bullish. Many industries in the country rely on imported raw materials and inputs for production. An increase in their raw materials cost, could then lead to an increase in the cost of goods produced.