#Financial news

Diversification, key to economic outlook’

By  Francis Akinnodi

The extent of diversification of Nigeria’s economy and revenue sources and the development of infrastructure would determine the sustainable economic outlook of the country in the medium to long-term.
An Economist, Elder Fessy Olabode told The Hope that the Nigerian macroeconomic outlook in the light of global and domestic variables, diversification, infrastructure and the development of other natural resources like gold would have positive impact on the national economic growth.
According to him, eradication of poverty in Nigeria depends on domestic production, but added that poor infrastructure has been a major impediment.
He said it is important for government to continue the ongoing quest to diversify from reliance on crude oil.
Olabode explained that the ongoing democratic transition in the United States of America (USA), Brexit and potential discovery of COVID-19 vaccine are global factors that could have significant impact on the Nigerian macroeconomic performance.
He said the breakthrough in the race to find a vaccine for COVID-19 as well as improved U.S-China trade relations and a Joe Biden presidency in the USA may uplift global sentiment, to the advantage of Nigeria.
The Akure based economist said the impact of lower interest rates in the country could stimulate consumption in 2021 and help to drive overall growth.
He pointed out that the rising gold price could offer Nigeria some support given the recent effort to develop the Nigerian gold mining and refining sector and to build further a national gold reserve.
“It is very important we talk about gold price because it could offer Nigeria some support. Nigeria has refined its own reserve Gold bar and paid N268 million for the 12.5kg bar to start a central bank stock.”
He commended the encouraging development in the diversification of the national economy, noting that the newly regulated gold mining sector is expected to create 250,000 new jobs.
While the 2021 national budget projects growth rate of 3.0 per cent, he said Nigerian economic growth is projected to expand by 1.7 per cent in 2021.
He noted that inflation has remained above Central Bank of Nigeria (CBN) target since 2015 but it has remained unsaturated because of the persistent boarder closure.
According to him, there are limited tools to tame inflation as tight fiscal policy may do more damage than good.
“The unsavoury combination of border closures, coronavirus related disruptions and lower interest rates have fuelled inflationary pressures in Africa’s largest economy. With consumer prices projected to jump to almost 14 per cent in October, this will be the highest rate since February 2018.
“In a perfect world, the government may have deployed tight fiscal policy to tame inflationary pressures. However, such a move that involves raising taxes and limiting government spending may do more damage than good at a time where Nigeria continues to heal wounds inflicted by COVID-19.
” With inflation projected to rise amid ongoing border closures, the Central Bank of Nigeria may have limited room to loosen monetary policy”, he said.
He said the emergence of Joe Biden as USA President-elect could bring an improved or stronger bilateral relations to Africa while improving trade relations between both sides would be beneficial to Nigeria.
According to him, prospect of a more predictable policy towards Nigeria and a weakening in dollar would further stimulate Nigerian economic growth.
He noted that while COVID-19 had impacted Nigeria like other economies, Nigeria’s COVID-19 data appeared to be more encouraging than several other countries.

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Diversification, key to economic outlook’

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