By Babajide Komolafe

FSDH Merchant Bank yesterday released its economic outlook for 2018, highlighting adjustment in electricity tariff, adjustment in price of petrol and the crisis in the middle belt as threats to achievement of single digit inflation.

Among other things, the company projected 3.16 percent Gross Domestic Product (GDP) growth rate, N345 per dollar exchange rate, decline in inflation rate to single digit and stock market growth rate of 27.43 percent for 2018.

Speaking    at the media presentation of the FSDH Economic and Financial Market Outlook (2018-2022), titled, “Strong Growth Prospect with Downside Risks”, Head of Research, FSDH Merchant Bank, Mr. Ayodele Akinwunmi listed three major  risks to single digit inflation in 2018.

He said: “Number one is adjustment to electricity tariff, with the parameters that are meant to determine the tariff, we actually have exceeded it. The electricity tariff has two critical factors namely: the gas price and the exchange rate. That is why the tariff we have in that sector now is no longer cost reflective.

“There is a need for them to increase it and if they do there will likely be more investment that will come to their sector. Once investment comes in you and I can get at least 20 hours electricity in a day across the country and when that happens it may increase the Consumer Price Index.”

“Number two is the adjustment to premium motor spirit (PMS). We cannot over flog this. We hear what all of them are saying across the country that the price of PMS landing cost is far higher than where the price is. If we are not going to pay subsidy on PMS it means that that price has to be adjusted up a bit.

“And of course the rising crisis in the middle belt, the Niger or Benue state, which is a food basket in this country and if these issues are not tackled on time it may likely lead to food shortage. It is a recipe for food shortage which will make food prices to go up.’’

We do not think federal government without political consideration would increase PMS price but if they do that, it will shift our inflation core to about 200 to 300 basis point which means that we will not have single digit inflation rate this year. So those are the major risk for our inflation forecast.”