The World Bank (International Bank for Reconstruction for Development) released their report for 2018 titled Global Economic Prospects; Broad based upturn, but for how long? The President of the World Bank Jim Yong Kim said “The broad based recovery in global growth is encouraging but this not a time for complacency. There is a great opportunity to invest in human and physical capital, If policy makers around the world focus on these key investments, they can increase the countries’ productivity, boost workforce participation, and move closer to goals of ending extreme poverty and boosting shared prosperity.”
While saluting the upswing in oil production that has helped to stabilize the nation’s productivity and currency markets, it says non-oil industrial sector has weakened due to inadequate power generation that has hurt manufacturing and construction. In the Year 2017, Nigeria through its ministry of finance used the debt capital markets to raise nearly $6bn internationally. It raised $3bn from the Eurobonds market to refinance maturing payments to bondholders, and $2.5bn to fund a supplementary budget. It floated another $300m diaspora bond for Nigerians who live and work abroad. In a response to the success of these listings, the World Bank says “Sovereign bond issuance rebounded in 2017, and improved global sentiment towards emerging and frontier markets helped narrow sovereign bond spreads”.
The increase inflow to the Nigerian Stock Markets that made NSE the 3rd best performer in terms of return on equity for 2017, as well as the increased deal making experienced can be attributed to improved access to foreign exchange that has root in several factors like:
- Ban on provision of FX for 41 imported items
- Establishment of the Investor & Exporter window through the Nigeria Autonomous Foreign Exchange Fixing (NAFEX)
- Increase in the price of oil that has raised oil revenues and the ability of the CBN to supply the markets through wholesale dutch auction system
It however cautioned that “Although firmer commodity prices encouraged foreign investments in the hydrocarbon and mining sectors, foreign direct investment inflows to the region are expected to increase only moderately. As a consequence the level of foreign exchange reserves in the region continued to be low. The median level of reserves was equivalent to 3 months of imports in 2017, the same as in 2016, but below its peak of 3.9months of imports in 2014, pointing for the need for countries in the region to build external buffers.”
The World Bank says food price inflation as a result of poor harvest across the country and access of foreign exchange on certain items is responsible for the headline inflation remaining at 15.94%