Nigerian stocks are on route to ending the trading week almost 1 per cent higher after the Central Bank of Nigeria, CBN, expressed optimism over the economy during its 274th Monetary Policy Meeting (MPC).
Buying sentiment towards the All Share Index (ASI) found further support from giant Dangote Cement after the company revealed share buyback plans.
According to the CBN governor, the “Nigerian economy is still very strong and resilient” in the face of COVID-19 with the banking sector weathering the current storm. However, as coronavirus cases in Africa’s largest economy near 39,000, concerns are likely to mount over renewed lockdowns and rising unemployment.
Given the constant disruptions, chaos and economic instability caused by COVID-19, the outlook for Nigeria and many other emerging markets remains clouded by uncertainty.
Rising inflationary pressures in Nigeria are likely to discourage the CBN from cutting interest rates anytime soon. The Central Bank left benchmark interest rates unchanged at 12.5% during its meeting in July, and this may remain the status quo for the rest of 2020. With interest rates expected to remain unchanged, more attention will be directed to unconventional monetary policy tools and fiscal policy which is seen as a sharper and more effective weapon against the coronavirus menace.
The Federal Reserve approved a 2.3 trillion Naira stimulus boost at the end of June to bolster key sectors of the economy with a 12-month timeline for implementation. Will this have the desired impacts on economic growth? Time will tell.
External factors in the form of Oil prices, US-China trade tensions, China’s economy and the Dollar’s performance among many other themes will influence Nigeria’s growth outlook for 2020.
Oil’s performance over the next few weeks will determine whether OPEC+ made the right move to taper record production cuts from 9.7 million barrels to 7.7 million. Speaking of commodities, Gold has jumped to a fresh 9 year high above $1895.
This is good news for Nigeria after the country refined its own Gold and purchased the product into a new Gold reserve