Nigeria’s economy, measured by the Gross Domestic Product (GDP), is projected to expand by 2.0 per cent in 2021, according to research team at FBNQuest.
The country’s economy during the third quarter of 2020, slipped into the second recession in four years under President Muhammadu Buhari as a result of the two straight declines in the GDP; 6.10 per cent in Q2 and 3.62 per cent in Q3.
However, both the fiscal and monetary authorities in the country have expressed optimism that this economic crisis would be short-lived as the GDP will record growth in the first quarter of 2021.
FBNQuest Research further said the low-interest rates in the United States and an average Bonny Light Crude price of $56 per barrel will support Nigeria’s economic recovery in 2021.
“In addition to fiscal stimulus and private-sector investment, the report identifies financial technology, agriculture, and ICT as primary drivers of growth in 2021,” the firm further noted.
However, FBNQuest Research said the exchange rate in Nigeria will suffer a decline against the US Dollar at the Investors and Exporters (I&E) window of the foreign exchange market.
The report noted that at end-2021, the exchange rate of the Naira to the Dollar at the I&E/NAFEX will average at N419/$1.
According to FBNQuest, a combination of higher oil revenue, multilateral loans and Eurobond sales should underpin reserves this year and allow the Central Bank of Nigeria (CBN) to contain Naira depreciation.
With regards to asset prices, FBNQuest projects another positive year for equities in 2021, noting that lower yields and the elevated liquidity available to domestic institutions buoyed stocks in 2020.
The impact of lower rates is expected to carry over into 2021, albeit with less dramatic impact, as domestic institutions are swayed by dividend yield offered by bank stocks, it said.
The team further disclosed that a number of non-financial stocks such as Seplat, Flour Mills, Nestle Nigeria and UAC of Nigeria are also expected to outperform in 2021.
FBNQuest projects that the All Share Index (ASI) of the Nigerian Stock Exchange (NSE) will rise 20 per cent in 2021, while in the fixed income market, yields are projected to rise by 3 percentage points to 10 per cent to 11 per cent on most bonds by the end of the year.
According to the firm, however, these comments are not a recommendation to buy, sell or hold any stocks, as the report only seeks to present projections based on analyses.