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CBN targets GDP growth at 3.1%, sees inflation rate of 15.35 % at end of 2021

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By Oludare Mayowa

The Central Bank of Nigeria (CBN) has said that the country’s economy is expected to close the year at 3.10 percent growth as a result of growth enhancing policy measures taking by both the fiscal and monetary policy authorities.

Speaking at this year’s dinner of the Chartered Institute of Bankers of Nigeria (CIBN) late Friday, the CBN Governor, Godwin Emefiele said the projected Gross Domestic Growth (GDP) for the fourth quarter of 2021 wil stand at nearly 2.91 percent.

Emefiele said the projected GDP growth for 2021 will be better than the last year’s negative growth of -1.8 percent while inflation is expected to continue on it downward trajectory.

“Output growth rate for the Nigerian economy is broadly estimated by key institutions to consolidate in 2021. The IMF and the World Bank project real growth rates of 2.6 percent and 2.4 percent, respectively while the estimate by the Federal Ministry of Finance and National planning stands at 3.0 percent.

“Generally, real GDP growth rate is projected to remain robust and strengthen within the short-term, regardless of the immanent vulnerabilities.

“With this continued strengthening, real GDP could recover beyond the pre-pandemic levels by the first quarter of 2022. Further simulations of the medium-term projections suggest that Nigeria’s real GDP could surpass pre-COVID trends by 2024,” Emefiele told top bankers, business moguls and captains of industry at the CIBN yearly dinner.

However, he said despite the positive outlook for the economy, the economic growth remains fragile, as unemployment and inflation rate remain at levels that are not very supportive of growth.”

“I would like to state that notwithstanding these positive indicators, our economic growth remains fragile, as our unemployment and inflation rate remain at levels that are not very supportive of growth.

“Second, continued implementation of our intervention efforts would need to be undertaken to sustain the recovery efforts and stimulate further growth of the economy.

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“Third, given population growth at about 2.7 percent annually, it is important that we continue to deploy measures that will enable our economy to attain annual growth rates of over 5 percent.”

Emefiele also touched on the significant growth recocovery in the country current account deficit, which he said “has narrowed significantly, from a huge deficit of 4.53 percent of GDP in the 4th quarter of 2020 to negative 0.44 percent of GDP in the 2nd quarter of 2021 due to a surplus position in the goods account.”

He said the surplus position in the goods account is due to a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittance inflows.

According to him, the country’s remittance inflows have been supported by the regulatory bank’s naira for dollar program, and “we have seen a surge in remittance inflows from over $5 million per week in June 2020 to over $100 million per week in October 2021.”

On headline inflation, the number one banker said inflation rate is expected to moderate to 15.35 percent, and 14.91 percent by December 2021 and February 2022, respectively.

Core inflation, according to him, is equally forecasted to fall from 13.74 percent in October 2021 to 13.39 percent in December 2021 and further to 12.68 percent by February 2022, while food inflation falls from 19.57 percent to 17.26 percent and 16.58 percent over the same period.

He said domestic disinflation is projected on the backdrop of the favourable impact of the various CBN interventions on the real sector and the gradual upscale of economic activity, which is expected to keep prices moderate in the near-term.

Emefiele said based on in-house analysis and simulations, external reserves could surpass $42 billion by mid-2022 from the US$41.5 billion in 2021 third quarter, based on the dynamics of oil price and FX demand for import.

“Generally, external reserves is expected to be at relatively comfortable levels with expectation of sustained trend of current crude oil price, the impact of Eurobond Issuance, and stable exchange rate condition,” he said.

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