Projects 12.15% average inflation rate for 2019

By Babajide Komolafe

FSDH Merchant Bank has called on the federal government to roll out incentives to attract private sector investment for infrastructure development.

The bank made this call in its medium-term economic outlook saying attracting private sector investment to develop the nation’s infrastructure is necessary to protect from headwinds in the global economy.

•Ayodele Akinwunmi, Head, Research, FSDH Merchant Bank

Meanwhile, the bank has also projected average inflation rate of 12.15 percent for 2019, and 11.5 percent for January.

Presenting the outlook at a press briefing in Lagos, FSDH Merchant Bank Head of Research, Mr. Ayo Akinwunmi, said that the headwinds in the global economy includes the trade war between United States and China which will likely lead to decline in demand for crude oil and hence drop in crude oil prices, which imply reduced foreign exchange revenue for Nigeria. He said in addition to this is  interest rate hike in the US and Europe, and need for tight monetary policy by the Central Bank of Nigeria (CBN) to sustain foreign portfolio investment in Nigeria.

He noted that another head wind is likely  increase in global food prices, due to shortage of food supply, adding that this could translate to higher food inflation in Nigeria.

https://newlive.vanguardngr.com/2019/01/nigerias-rising-debt-profile-worrisome-neca/

Stressing that to insulate the country from the impact of this development the requires policy measures that will attract private sector investment into infrastructure development.

He said: “We can begin to bring out policies to ensure that we woo more foreign investors to Nigeria. Roll out incentives both in terms of tax incentives like tax holidays, and then in terms of our roads, we need to toll them and make sure we make money from those facilities to build others and also to maintain existing ones.

Government needs to involve private sector and give them concessions that will make those infrastructures attractive for them, and government must honour their agreement. Some of these infrastructures are long term projects; you can’t break even in five years.

“There must be consistency in policies such that will ensure that foreign investors will have confidence in our local economy to invest not only in our financial markets but in our real economy, to build structure that will build structures that will support non oil sector of the economy to enable us make non oil grow”.

On the bank’s outlook for inflation in 2019, Akinwunmi said: “In our inflation forecast for this year, we have two scenarios. The first is scenario 1, which is no adjustment to PMS price and electricity tariffs and scenario 2 based on adjustment to the tariffs and PMS price.

But whichever way you look at it for this year, either there is an adjustment to those prices  as we think it should be, it is still going to remain in double digits because of developments outside those points, but if they are not, we expect that from June, if they adjust them, inflation will spike to about 13.4 percent and to end the year it will be in the region of 13.2 percent.

So on the average this year, inflation rate will be in the region of 12.15 percent given that from January to May we have the normal inflation number, ranging from 11 percent to 13.3 percent. Based on the numbers available to us now, we have review our inflation forecast for the month, it likely be in the region of 11.5 percent for January.”