- Norrenberger Economic Outlook made some key economic projections. Run us through the barometers used in these projections.
In our economic outlook report, we have provided detailed projections for four key economic indicators: inflation, GDP growth, exchange rate, and external reserves. Our analysis indicates that headline inflation will moderate gradually in the second half of the year, reaching 32.26% by December 2024. We project that real GDP will grow by 3.1% in 2024, signalling a steady economic recovery. The naira is expected to average around N1,450 per US dollar, reflecting ongoing foreign exchange market dynamics. Additionally, we estimate that external reserves will close the year at approximately $36.1 billion.
To ensure the accuracy and reliability of our forecasts, we utilized a comprehensive blended econometric model, particularly the auto-regressive integrated moving average (ARIMA) model. This model integrates historical data trends, current economic developments, and anticipated events and developments from major drivers in the latter half of the year. By combining these elements, our projections offer a robust analysis that reflects both past performance and future expectations. This approach allows us to provide a nuanced and forward-looking perspective on the Nigerian economy, helping stakeholders make informed decisions in a rapidly changing economic environment.
- The CBN has continued to tighten rates to tame inflation, but it seems to be counter productive. What do you think can be done better?
The Central Bank of Nigeria (CBN) has adopted a hawkish monetary stance to address inflationary pressures and stabilize the foreign exchange (FX) market. This has included raising the monetary policy rate (MPR) by a cumulative 800 basis points year to date. While these multiple rate hikes have had some impact, as evidenced by the gradual moderation in the month-on-month inflation rate, their overall effectiveness in tackling inflation has been limited.
We believe that a more coordinated approach, involving both the CBN and fiscal authorities, would yield a more significant impact on reducing inflation. This coordinated strategy could encompass a range of policies, including the adoption of diversified monetary policy tools, such as open market operations and reserve requirements, to manage liquidity more effectively.
Additionally, supply-side government interventions are crucial. These could involve investments in infrastructure, support for agricultural productivity, and efforts to eliminate bottlenecks in key sectors, thereby addressing the root causes of inflation. Effective FX management is also essential; adopting a more flexible exchange rate regime while strategically intervening to prevent excessive volatility can help stabilize prices.
- Inflation and exchange rates have taken a big toll on manufacturing and other sectors. What can be done to salvage the situation?
While fiscal and monetary authorities strive to stabilize the exchange rate using available instruments, it is crucial for businesses, particularly in the manufacturing and other sectors, to adopt strategies to hedge against the impact of foreign exchange (FX) volatility. In the face of uncertain exchange rates, businesses must proactively protect themselves to ensure sustainability and growth.
One effective approach is to diversify export markets. By expanding into new international markets, businesses can earn foreign currency, which can be used to meet import obligations and reduce dependence on a single market. This diversification not only spreads risk but also opens up new revenue streams and growth opportunities. Additionally, businesses can employ various FX hedging strategies such as forward contracts, currency swaps, strategic pricing amongst others to mitigate the risks associated with currency fluctuations.
- Real estate investment is seen as one of the most viable investments with high ROI. But the high cost of building materials and exchange rates is becoming more challenging for the sector to thrive. What is your perspective on this and how can the sector be improved?
Real estate investment indeed remains one of the most attractive and viable investment options due to its potential for high returns on investment (ROI). However, the sector currently faces significant challenges, primarily due to the rising cost of building materials and the volatility of exchange rates. These issues have made it increasingly difficult for the sector to maintain its growth trajectory and profitability. The real estate sector grew by a marginal 0.84% in Q1 2024, slower than the 1.34% and 1.7% growth recorded in Q4 and Q1 2023 respectively. In a bid to drive the sector’s growth, some of the following policies can be adopted, including local sourcing of raw materials, innovative financing solutions, government incentives and support, public-private partnerships, as well as technological advancements.
- There has been calls for alternative to mortgage financing for low-income earners. PenCom has said 25% of RSA balance can be used for mortgage but it doesn’t seem to be enough. How can we get it right in that critical area?
Addressing the challenge of providing adequate mortgage financing for low-income earners requires innovative and multifaceted solutions. While the Pension Commission (PenCom) has allowed the use of 25% of the Retirement Savings Account (RSA) balance for mortgage purposes, this measure alone may not suffice to bridge the gap. To effectively address this critical issue, a combination of policy adjustments, financial innovations, and supportive infrastructure is necessary. These could include Private Public Partnerships (PPPs), subsidized housing programs such as state-owned Family Homes Fund and Federal mortgage bank are currently pursuing, micro mortgages, housing cooperatives, tax relief and subsidies, streamlining mortgage processes. In implementing these strategies, Nigeria can create a more inclusive and supportive environment for low-income earners to access mortgage financing and achieve home ownership. This comprehensive approach will not only address the immediate needs of low-income households but also contribute to long-term economic stability and growth.
- The first half of the year has passed, and we are now in the second half, tell us some of Norrenberger’s achievements and what you plan before the end of the year?
As we transition into the second half of the year, it is imperative to reflect on Norrenberger’s achievements over the past six months and outline our ambitious plans for the remainder of the year. Our journey has been marked by significant milestones and a steadfast commitment to excellence in the financial sector. One of our most notable achievements in the first half of this year has been our performance in the mutual funds industry. We are proud to be recognized among the top-performing mutual funds, a testament to our strategic investment approaches, rigorous risk management, and unwavering dedication to delivering value to our clients. This recognition not only highlights our competitive edge but also reinforces our clients’ trust in our capabilities.
In addition to our performance in mutual funds, we have made strides in expanding our product offerings, ensuring that our clients have access to a diverse range of investment options tailored to their unique financial goals. Our team has worked diligently to enhance our service delivery, leveraging technology and innovation to provide seamless and efficient investment experiences.
Building on the momentum of our achievements, we have set ambitious plans for the second half of the year. Our foremost goal is to maintain our position as one of the top-performing asset management firms in the country. This will involve continuous refinement of our investment strategies, staying abreast of market trends, and proactively managing risks to safeguard our clients’ investments.
In our pursuit of excellence, we are also committed to broadening the range of investment options available to our clients. By introducing new and innovative financial products, we aim to cater to the evolving needs of our clientele and provide them with more opportunities to grow their wealth.
Also, a key focus area for us is financial education. We recognize that an informed client is an empowered client. Therefore, we plan to intensify our efforts in educating both our existing clients and potential investors about the importance of saving and investing. Through seminars, workshops, webinars, and comprehensive online resources, we aim to demystify financial concepts and empower individuals to make informed investment decisions.
- Lastly, what is your perspective on Nigeria’s investments landscape and efforts by Government to boost the environment?
Nigeria’s investment landscape presents a dynamic mix of opportunities and challenges. The country boasts significant natural resources, a large and youthful population, and a strategic geographical location. However, factors such as inadequate infrastructure, lack of political will, and regulatory uncertainties have historically hindered the full realization of its investment potential. Recent efforts by the government to improve the investment environment show promise, yet there’s still much to be done. Continued focus on improving infrastructure, streamlining regulations, promoting economic diversification, along with addressing security and corruption issues, will be key to unlocking Nigeria’s full investment potential and fostering sustainable economic growth.
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