Rejoice Taddy

last updated Mon, May 22, 2023 2:03 PM

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Nigeria’s GDP shrinks to 1.2% due to lack of cash

By Rejoice Taddy
| Updated 14:03 22/05/2023
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A financial advisory and economic research company, The Financial Derivatives Company or FDC has predicted that Nigeria’s Gross domestic product or GDP will depreciate to 1.2% in the first three months of 2023 compared to 3.52% in Q4 2022.

The financial institution said in its monthly economic update published May 19, that the foretold decline in Nigeria’s Q1 GDP will largely be tied to the effect of the cash crunch, which withheld aggregate demand.

It also stated that inflation is expected to continue its positive trend in April due to the confluence of higher aggregate demands like Easter and Ramadan celebrations, and supply shortages.

It added that sustained pricing pressures will be one of the major considerations at the Monetary Policy Committee meeting this month.

While the United States Federal Reserve or U.S Fed has signalled a possible stop in interest rate increase due to backward inflation and banking system crisis, the Nigerian Monetary Policy Committee or MPC, is likely to continue monitoring for a longer period as inflation remains stubbornly high. 

The FDC added that the Central Bank’s tight monetary policy will keep interest rates raised, serving as an incentive for investors to rebalance their portfolios in favour of fixed-income securities.

The financial institution said oil prices are likely to increase in the near term due to low US crude inventory, improved Chinese demand and a possible shift towards investment in commodities as the Fed signals a hold in rate boost.

It also added that higher oil profits are positive for Nigeria’s fiscal and external buffers.



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