RMB: Nigeria’s economy on track for a rebound rather than recovery

Rand Merchant Bank has projected a 2% growth for Nigeria's economy this year, banking on the performance of the non-oil sector in the first half and the oil sector in the second half. According to Uso-RO Essien, Team Lead for Research at RMB Nigeria, the outlook for the economy is one of a rebound rather than a full recovery from the challenges of 2020. While acknowledging the improvements in economic fundamentals, Essien also highlighted concerns regarding the efficacy of vaccinations against new strains of the virus and the pace of vaccination rollouts. The bank anticipates a significant improvement in economic conditions in 2022. In terms of inflation, RMB forecasts an average rate of 17.2% for the year, citing government reforms in sectors such as power tariffs and PMS pricing as key drivers of inflationary pressures. However, the bank expects moderation in inflation in the second half of the year with the structural changes taking effect. In the capital market, RMB favors equities over other asset classes, pointing to attractive valuations in Nigerian equities compared to their African peers. The bank sees potential for above-average returns in the equities market despite the disruptions of 2020. Within the equities market, banks have been identified as a resilient sector with robust risk management frameworks and diversification strategies. The telecom sector, on the other hand, is expected to see growth but challenges in translating this growth to bottom-line profitability due to high operational costs and inflation. Overall, RMB's outlook for Nigeria's economy in 2021 is one of cautious optimism, with a focus on the non-oil sector driving growth and potential opportunities in the equities market.