By Benjamin Umuteme
Associate Professor and Head of Department, Banking and Finance, Nasarawa State University, Dr. Uche Uwaleke has warned that except the present fuel crisis is quickly resolved, it may trigger inflation.
According to Dr. Uwaleke, the negative effects of the current fuel scarcity may likely linger into the first quarter of 2018 leading to increase in the price of goods and services.
In order to respond to this, he envisions that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) may likely leave the MPR uncharged.
In his forecast for 2018, the don noted that economic performance in 2018 will be a marginal improvement over 2017 as the government revenues are still highly dependent on the oil sector.
“It is a no brainer that the performance of the economy in the New Year will be powered by the outcomes in the international crude oil market. OPEC’ s decision to extend the output cut agreement through 2018 provides a guarantee that the crude oil price will stay above the budget reference price of $45 per barrel.
“There is a flip side though to the sustained oil price increase which has already manifested in the high cost of importing petroleum products.”
While noting that unemployment rates may like rise in the first quarter of 2018 to about 20 per cent, Dr. Uwaleke noted that Real GDP growth rate, year-on-year, may likely hit the two per cent mark as according to him, “it will be more from base effect than actual expansion in economic activities.”
The University don further said there may be turbulence in the economy in the fourth quarter of 2018, resulting from hyper political activities. He noted that this will lead to politically-motivated spending that will shift inflationary challenge more from cost-push to demand -pull inflation. Core inflation in 2018 will be highest in the month of December, he added.
The pressure to make last-minute impression on Nigerians through populist policies will result in increased government borrowings thereby widening fiscal deficits and undermining fiscal consolidation. Interest rates will spike, exacerbating the condition of deposit money banks that had extended credit facilities to politically-exposed persons. The rate of non -performing loans will surge during this period.