What will drive Nigeria’s economy in the second-half of 2021?

As Nigeria enters the second half of the year, there are key factors at play that could shape the country's economic trajectory in the coming months. In a recent interview on CNBC Africa, Damilola Akinbami, Head of Research at the Financial Derivatives Company, highlighted some crucial points concerning the global and domestic landscape that could impact Nigeria's economy. The key theme of the discussion revolved around the potential drivers of economic growth and the challenges that may lie ahead. Here are some key takeaways from the interview: First and foremost, the global situation, particularly the ongoing COVID-19 pandemic and the deployment of vaccines, remains a critical factor influencing Nigeria's business environment. A new variant known as the Delta variant has been spreading rapidly in parts of Europe and Asia, raising concerns about a resurgence of restrictions and lockdowns. This could have adverse effects on the global economy, affecting demand recovery and commodity prices. While vaccine rollouts are underway in various countries, a mismatch between vaccination rates and the spread of the variant could lead to renewed lockdowns, hindering economic recovery. Moving on to the energy sector, the ongoing meeting of OPEC and its allies to discuss production policies also holds significant implications for Nigeria. Decisions on whether to increase oil supply or maintain current levels will be influenced by factors such as the potential return of Iranian oil to the market and the demand outlook, especially in key consuming regions affected by the pandemic. Despite possible supply increases, oil prices are expected to remain elevated, supported by summer demand and market dynamics. In terms of Nigeria's economic performance, projections for the second quarter point to a significant growth rebound driven by base effects, with a forecasted growth rate of around 4.5%. However, the second half of the year is expected to see a moderation in growth to an average of 2.5%, reflecting both the fading base effects and challenges such as below-average rainfall and security concerns impacting the agricultural sector. While the economy is poised for a positive trajectory, risks such as a potential third wave of the pandemic and associated lockdowns could dampen growth prospects. Looking ahead to the monetary policy landscape, the upcoming Monetary Policy Committee meeting will focus on key parameters such as inflation trends and liquidity conditions. With inflation easing slightly in recent months and liquidity management measures in place, the Central Bank of Nigeria is likely to maintain its cautious stance in the near term. While there is a possibility of a further depreciation of the Naira, policymakers are expected to balance the need for price stability with the challenges posed by the evolving economic environment. Overall, the outlook for Nigeria's economy in the second half of 2021 points to a mixed picture of growth potential and external uncertainties. As the country navigates through global challenges and domestic factors, policymakers and businesses will need to stay vigilant and adaptable to ensure a sustainable and resilient economic recovery.