Evaluating Emefiele’ GDP Projection, ahead of pre-COVID trends by 2024

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During the Banker’s nite organized by the Chartered Institute of Banker of Nigeria , CIBN,  on Friday,  Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele, said Nigeria’s real Gross Domestic Product (GDP) could surpass pre-COVID trends by 2024.TUNMISE OLAOYE in this report evaluates the rationale behind this prediction

Emefiele at the 56th Chartered Institute of Bankers of Nigeria (CIBN) Annual Bankers Dinner in Lagos said Nigeria’s real Gross Domestic Product (GDP) could surpass pre-COVID trends by 2024.

According to him, the apex bank’s in-house model shows a continued and strong rebound of the domestic economy.

“CBN’s in-house model, after an exhaustive simulation with various oil price possibilities and numerous scenarios of other macroeconomic metrics, indicates a continued and strong rebound of the domestic economy,’’ he said.

Emefiele said the near-term outlook of the country’s economy is brightening significantly, with improvements projected into the short and the medium term. He said that the real GDP growth rate is projected to remain robust and strengthen within the short term.

“Output growth rate is projected to remain positive from 4.03 per cent in 2021 Q3 to nearly 2.91 per cent in 2021 Q4, implying a total growth of about 3.10 per cent for 2021. The short-term projection indicates a continued strengthening of the growth rate.

”Deliberate structural policies and reforms are needed to raise this projected trend higher towards the desired 5 per cent average growth level,” he said. Emefiele said that the output growth rate for the Nigerian economy is estimated by key institutions to consolidate in 2021.

He said the International Monetary Fund (IMF) and World Bank project real growth rates of 2.6 per cent and 2.4 per cent respectively, while the Federal Ministry of Finance and National Planning estimates stand at 3.0 per cent.

“Generally, the real GDP growth rate is projected to remain robust and strengthen within the short term, regardless of the immanent vulnerabilities. With this continued strengthening, real GDP could recover beyond the pre-pandemic levels by 2022. Q1.

”Further simulations of the medium-term projections suggest that Nigeria’s real GDP could surpass pre-COVID trends by 2024,’’ Emefiele said. On Nigeria’s inflation rate, the CBN governor said that the headline inflation rate is expected to moderate to 15.35 per cent and 14.91 per cent by December 2021 and February 2022, respectively.

He said core inflation was equally forecasted to fall from 13.74 per cent in October 2021 to 13.39 per cent in December 2021 and further to 12.68 per cent by February 2022.

Emefiele said that food inflation is also expected to fall from 19.57 per cent to 17.26 per cent and 16.58 per cent over the same period. He said domestic disinflation is projected on the backdrop of the favourable impact of various CBN interventions on the real sector and gradual upscale of economic activity, expected to keep prices moderate in the near term.

On Foreign Exchange reserves, Emefiele predicted that the country’s external reserves might surpass US$42 billion by mid-2022 from US$41.5 billion in 2021 Q3. He attributed the steady increase in external reserves to the dynamics of oil price and foreign exchange demand for imports.

“Generally, the external reserve is expected to be relatively comfortable levels with an expectation of sustained trend of current crude oil price, the impact of Eurobond Issuance and stable exchange rate condition,” he said.

Gov. Babajide Sanwo-Olu of Lagos State said CBN under the Emefiele leadership left no stone unturned to ensure that credits were given to Small, Medium and Large Businesses in the country.

“I stand here as a major beneficiary of the can-do spirit that the Nigerian banking sector has shown us,” he said. Sanwo-Olu thanked the banking stakeholders for ensuring that they collaborate and put the COVID-19 pandemic behind. He added that this has led to knowing the importance of the banking sector to the growth of the economy.

The governor said that credit is important and has shown its power to deepen Nigeria’s struggling economy in the face of the COVID-19 pandemic and disaster.

“Nigeria cannot be an exception, we must continue to brainstorm on how we can reduce the cost of credit and burden to our beneficiaries,’’ Sanwo-Olu said. Earlier, Dr Bayo Olugbemi, CIBN President, commended the CBN governor on the slight improvement seen in the exchange rate.

“Worthy of note is the improvement, though slight, being witnessed in the exchange rate of the Naira. I wish to call for its sustenance.

”We are certainly working in interesting times with global growth rate at its lowest and traditional norms being challenged on a daily basis.

“I would also like to congratulate the CBN Governor on the official lunch of e-naira, Africa’s first Central Bank Digital Currency, which principal aim is to deepen financial inclusion and integrate millions of unbanked Nigerians into the banking system.

“Whilst the modality for the operation is being fine-tuned, I have no doubt in my mind that it is a welcome development and a step in the right direction,’’ Olugbemi said.