AfDB Foresees Stronger Naira in 2018

The African Development Bank Group, (AfDB) has stated that it expects a stronger naira in 2018, just as it applauded the measures taken by the Central Bank of Nigeria to ensure price stability. The multilateral institution stated this in its African Economic Outlook released yesterday. On the country’s macroeconomic position, it stated: “Fiscal policy remained expansionary in 2017 as in 2016. Although total spending as a percentage of GDP declined from 13% in 2014 to 10.3% in 2017, revenues declined more sharply, from 11.4% to 5.6%.

“The budget deficit was estimated at 4.8% in 2017, up from 4.7% in 2016, and is projected to improve to 4.3% in 2018 and 4.1% in 2019, as revenue performance improves. At 14%, unemployment remained high in 2017, the same as in 2016, and is expected to decline only slightly in 2018, to 13.5%, as recovery eases production constraints in manufacturing and agriculture.”

Also, it expects monetary policy in Nigeria to remain contractionary in 2018. It added: “The policy rate has been kept at 14% since July 2016 to support the naira and control inflation. Inflation has remained stubbornly high and in the double digits—an estimated 16.2% in 2017, up from 15.6% in 2016—but is projected to ease to 13.7% in 2018 and 12% in 2019.

“Foreign currency liquidity has improved following the introduction of administrative measures by the Central Bank since early 2017.

“The measures include a trading window for portfolio investors at market determined rates and the introduction of the Nigerian Autonomous Foreign Exchange Rate Fixing, which allowed commercial banks to quote forex rates that are close to parallel market rates. The naira remained stable for most of 2017 and is expected to strengthen slightly as the economy continues to recover.”

Also on economic performance and prospects for Nigeria in 2018, it noted that the economy would continue to show signs of recovery from the 2016 recession.