How Nigeria’s economy could be affected by global events – Analysts

A number of events that occurred on the global scene this past January, could encourage short-term stability for the Nigerian economy.

This is according to the Head of Research at FSDH Research, Mr Ayodele Akinwunmi, who also believes that the outcome of this weekend’s presidential election will determine the direction for the economy.

The global events under consideration range from policy decisions in the United States of America to the decision by some foreign investors to pull resources together for investment in the country.

Take for instance, the United States’ Federal Reserve, through its Federal Open Market Committee (FOMC), decided in January to maintain the interest rate at 2-1/4 to 2-1/2 percent.

“the committee continues to view sustained expansion of economic activity, strong labour market conditions, and inflation near the committee’s symmetric 2 percent objective as the most likely outcomes. in light of global economic and financial developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.” -fomc

The statement was said to have been interpreted to mean that the FOMC will not be raising its interest rate during the first two quarters of the year. As such, foreign investors who expecting a dramatic US interest rate hike in may now reconsider their investment strategy, especially in the emerging and developing markets.

Already, this development has encouraged positive short-term economic outlook for Nigeria. According to Mr Akinwunmi, the Nigerian economy witnessed an increase in the inflow of Foreign Portfolio Investment (FPI) last month.

In specific terms, Foreign Portfolio Investment resulted in the inflow of about $1.32 billion in January 2019, which is the highest recorded since last April. The Analyst believes this is a reflection of foreign investors taking advantage of higher yields on fixed income securities.

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Also, trade sanctions on Venezuela crude oil and production cut by Organisation of Petroleum Exporting Countries (OPEC), also helped push up crude prices.

This situation is a shift from what obtained late last year

Recall that in December 2018, the so called trade war between the United States of America and China had ripple, negative effect on the global economy; of which the Nigerian economy is a part of.

Source: Nairametrics

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