Managing Director Financial Derivatives Company Limited, Bismarck Rewane has predicted that the Monetary Policy Committee of the Central Bank may further cut rate by another 25 basis points to 13.25 per cent.
Reviewing the nation’s economy and outlook at the Lagos Business School Breakfast session in Lagos, he said that inflation will rise to 11.3 per cent in May this year.
Rewane also said that Gross Domestic Product (GDP) growth numbers would be flat at 1.9 per cent in the second quarter of 2019 while the naira will weaken slightly to N362/N363 to a dollar as foreign exchange demand increases.
Making projections into the month of June, he said external reserve will decline marginally, unemployment data will show further weakness in the second quarter up to 28 per cent while stock market will drop by three to five per cent.
For the capital market to grow, he said there would be more right issues as companies seek to fix their balance sheet, new banking licenses in an already congested field.
Rewane also said that Buhari government expected to announce his cabinet in early June, noting that there would be portfolio and personality changes but have policy continuity while execution of policy and response to shock will be the major challenge within the period.
Speaking on the outlook for the month, Rewane said equity market will regain positive momentum due to declines in yields on fixed income instrument, stability in forex market, rising crude oil prices among others.
He also said that there will be inflow in foreign portfolio investment supported by external reserve accretion and fed less likely to increase rates in 2019.
He said that MTN planned listing would improve sector diversity on the Exchange, stressing that currently four sectors- banking, consumer goods, Industrial and Oil and gas has 80 per cent of the market capitalisation.
He said that there is possibility of sell pressure on stocks as investors seek liquidity to invest in MTN.
Describing MTN as the market leader in the Nigeria telecoms industry with 60.3 million subscribers representing 40.7 per cent market share, the economist said it will be the second most capitalised company on the Exchange and it is likely to significantly impact on mobile payment in Nigeria.
Addressing the economic and political issues and their impact on businesses, portfolios and strategies, Rewane said as the first term of the current administration winds down, investors and analysts are having mixed views on the shape of the economy in the next four years.
He noted that while some are optimistic about a possible fundamental change in structure and direction, others are of the view that it will be Token continuity without any change in substance.
He explained that irrespective of whoever is appointed, the country’s macroeconomic problems will persist and might get worse if no fundamental adjustments is made to the way government, business and policymaking is conducted.
He said that revenue swings will continue to mask the management inadequacies, both structural and cultural, of a bloated and rent seeking bureaucracy while the adoption of an investment led strategy by the government will increase aggregate investment from 14 per cent of GDP to 30 per cent in the next 2 to 4 years, which is the only way to get growth past the 6 per cent threshold in the near term.