Guarantee Trust Bank (GTB) analysts have predicted economy growth rate of between 2.3 per cent and 2.8 per cent in 2018. The bank in its 2018 Economic Outlook release on Tuesday night said 2018 would be driven by sustained oil receipts, higher government spending on infrastructure and activities leading to 2019 elections. The federal government had proposed a budget of N8.4 trillion, dubbed, budget of Consolidation”, is predicated on a benchmark oil price of $45 per barrel, oil production estimate of 2.3 million barrel per day (mbpd), exchange rate of $1/N305, inflation rate of 12.4 per cent and real GDP growth of 3.5 per cent.
The analysts noted that the marginal weakening of the naira in December 2017, where the CBN sold dollars for $1/N307 (from $1/N305) lends credence to the bank’s expectation for a convergence of the rates in 2018. However, a N2 depreciation might be too insignificant to conclude that the CBN’s thoughts are completely in line with the banks. “Considering that the rate convergence will result in some form of depreciation of the naira with its resultant impact on pump price of Premium Motor Spirit (PMS) and general pricing of goods and services, we expect that the monetary authorities would work towards allowing all other official rates converge, while retaining the N305-307/ $1 rate for oil imports. If the convergence is not achieved by the end of Q1 2018, it is unlikely to happen in 2018 considering that a devaluation won’t be favourable when elections/Market liquidity would be further strengthened in the short to medium term given that oil prices and production volumes are at significantly higher levels compared to 2016”, the bank said
On interest rate, the bank said in view of the proposed utilization of the proceeds of the $3 billion dual-tranche Eurobond split between funding the 2017 budget capital projects and refinancing some short term domestic debt, we project that the yields on fixed income securities would decline marginally.