Lagos — An investment analyst, Lukman Otunuga, has expressed some measure of optimism about the country's latest GDP growth rate published by the National Bureau of Statistics (NBS) on Monday, saying volatility of the international oil market prices and other shocks may not sustain the trajectory in the medium-term.
Otunuga, who is a Senior Research Analyst at FXTM, said since the current global economic conditions remained inclement, making both developed countries and emerging markets feeling the negative impact, the signals were worrisome and therefore demanded caution on the part of the fiscal authorities.
He said: "Although the market mood slightly improved during the final months of 2019 amid trade optimism, caution remained a dominant market theme.
"Nevertheless, Nigeria was able to capitalise on the semblance of market stability and this was reflected in the GDP which expanded 2.55 per cent during the final quarter of 2019."
According to the investment expert, the combination of increased oil output, rising commodity prices and steps by the Central Bank of Nigeria (CBN) to boost credit growth stimulated the economy with full-year GDP expanding by 2.27 per cent.
He said, "This figure was not only above the International Monetary Fund (IMF) forecast of 2.1 per cent, but the highest growth seen since 2015. While the GDP figure is certainly encouraging and continues to illustrate Nigeria's resilience to external and domestic threats, the risks to the economy are mounting."
The financial expert further projected that severely depressed oil prices could hit economic growth during the first quarter of 2020.
"Oil has depreciated over 15 per cent since the start of the year amid the coronavirus outbreak. Crude accounts for less than 10 per cent of GDP, but it remains the biggest source of foreign revenue for the nation. China is one of Nigeria's biggest trading partners with total trade flows during the third quarter of 2019; surpassing $3.2bn. The combination of weak oil prices and slowing growth from China could negatively impact Nigeria's growth potential in 2020", he said.
Otunuga also pointed out that there would be a strong focus on economic data ahead of the next CBN policy meeting in March.
He said investors would direct their attention towards the latest manufacturing PMI figures scheduled for release on Thursday, February 27, "A figure that meets or exceeds the PMI market forecast of 58.4 may signal a recovery in the manufacturing sector - something that is supportive of growth potential," he added.
He explained that outside of Nigeria, the main theme influencing market sentiment would revolve around the coronavirus outbreak and impacts it would have on global economy, and that if risk aversion remained a dominant market theme and demand-side fears hit oil prices, the Nigerian naira and All Share Index (ASI) could slip this week.