Though inflation dropped by 0.18 points in June 2019, the Central Bank of Nigeria (CBN) has revealed that Nigeria’s economy will continue to witness double-digit inflation throughout 2019.
This was disclosed by the CBN Governor, Godwin Emefiele while reading the communique at the end of the two-day Monetary Policy Committee’s meeting on Tuesday in Abuja.
According to the CBN, Nigeria’s economy is expected to remain weak, peaking at 2.27% while inflation is expected at 11.37%. The CBN stated that the reason for the forecast of double-digit inflation is traceable to the escalating global economic events.
Global economy slowdown: The CBN noted that the global economy is weak, with persistent headwinds expected to continue for the rest of the year. Key amongst these headwinds listed by the CBN include:
- rising trade tensions, particularly between the US and its key trading partners in Europe, Canada, China, and India;
- rising debt levels in some Advanced Economies and Emerging Markets and Developing Economies (EMDEs); and
- growing political uncertainties across several regions
A weak economy: Two main economic indicators emphasized by the CBN are inflation and GDP. While explaining the reason for the forecast (slow in growth and double-digit inflation), the CBN stated that the weak growth projection hinged on the overall medium-term outlook for the global economy.
By the CBN’s projection, there are several indications of a continued weakening of global output into persisting policy uncertainties and sustained macroeconomic vulnerabilities.
Despite putting growth at 2.27% in 2019, the CBN stressed that the underlying premise in support of the projection for the economy includes:
- favourable oil prices;
- stable exchange rates;
- moderate inflationary pressures
- enhanced loan to the private sector;
- sustained CBN interventions in the real sector;
- effective implementations of the Economic Recovery and Growth Plan (ERGP);
- building of fiscal buffers; and
- improved security in the food-producing areas.
IMF’s upward review: Meanwhile, the International Monetary Fund (IMF), in its July edition of the World Economic Outlook, revised Nigeria’s economic growth projection to 2.3% by the end of 2019 from the initial 2.2% prediction. The report from the International Monetary Fund (IMF) indicated that Nigeria and other emerging economies would pose risks to global growth, which weighs heavily on emerging markets.
Consequently, the IMF revised downward its 2019 global growth projection to 3.3% from the initial 3.6% on the ground of growing political uncertainties and softening output growth across several regions.
The Bottom line: Analysts have opined that single-digit inflation is in insight after the economy recorded the slowest inflation in almost 11 months. The latest projection by the CBN suggests among other things that the slow momentum recorded in the first quarter of 2019 will still be maintained for now.