By Emeka Anaeto,Economy Editor

Private sector industry leaders have taken cautious positions in reaction to the change of government particularly at the national level in Nigeria, thus throwing the markets into limbo which may linger until definite statements on the direction of economic policies are made by President  Mohammadu Buhari. Last Friday ex-president Goodluck Jonathan handed over Nigeria’s economy in perhaps its most trying moment since the advent of the current democratic dispensation.

president Buhari & his Vice, Osinbajo

Economy analysts have highlighted the public sector and macro-economic challenges faced by the Jonathan administration in its last one year as a major source of concern in the private sector.

Key amongst the challenges is the massive and sustained decline in government revenue due to lower crude oil prices. Inflation is also tiptoeing northwards while external reserves continue to dwindle as monetary policy tightening is almost reaching its elastic limit.
Rising government debt, fuel scarcity crisis and epileptic power supply are also some of the challenges that the new government will have to grapple with to impact positively on the private sector.  Against the backdrop of the foregoing, economy analysts  at Afrinvest, a leading investment banking group in Nigeria, last weekend reiterated its  outlook for key macro-economic indicators post transition.

On its bear case it sees oil price trading below US$60.00 in the near to medium term while government revenue base will remain low.

The analysts also forecast lower level of reserves which may inform further pressure on exchange rate even as they expect inflationary pressure to continue retaining its average inflation rate of 9.5% for 2015.  The analysts stated ‘’amidst these headwinds, we forecast a tempered growth in domestic economic activities as we retain our 5.0% GDP growth rate forecast for 2015”. Meanwhile contrary to what was observed in the foreign exchange (forex) market in recent weeks, rates at the BDC segment stayed calm at N220.00/US$1.00 on all trading days of the week.

Forex market dealers believe the calmness observed in currency market may be linked to lower level of demand for the Naira as investors adopt a cautious approach to trading given short-term instability in the system as event leading to transfer of power from the Jonathan administration to Buhari-led government took place.

While optimism for the new administration was high, market observers expect the forex rates across market segments to be broadly driven by reactions to policy signals emanating from the hand over to the new government coupled with any other policy direction that follows. As currency traders await the forex policy direction under the new economy regime of Muhammadu Buhari, top of their wish list for the new administration is an overhaul of the nation’s foreign-exchange rules.
“The market would love to see some restoration of foreign-exchange flexibility,” said Dapo Olagunju, Access Bank’s treasurer in Lagos. “The question is, when will there be a meeting of minds?” “The market doesn’t move,” Mickael Avou Ahonzo, the Paris-based head of currency trading at Ecobank Transnational Inc., which operates across Africa told Bloomberg last week. “It’s frustrating. We’ve seen the same rate for the last one or two months. We don’t have many opportunities” to make money.
Central Bank of Nigeria (CBN) is believed to have started talks with dealers about how to loosen the trading restrictions at the beginning of May, 2015 but no decision was taken in that direction by the Monetary Policy Committee (MPC) meeting held two weeks ago due to the ‘wait-and-see’ position the committee took in respect of the advent of the new government. “There’s no change” yet to the currency regime, CBN spokesman Ibrahim Mu’azu told Bloomberg last week. “We have to see the direction of the incoming government.”
In the bond market the Nigerian Sovereign yield curve shows the market’s general bearish sentiments as the curve shifted. Whilst at the shorter end of the curve, yields were tempered, the medium and long term ends of the yield curve showed investors’ bearish run.   Again money market dealers expect overall performance of the financial market to be largely driven by investors’ reactions to perceived policy signals of the new government and its economic programme. Hence, the bond market was expected to remain calm and as such yields should hover around current levels.