Experts Hinge Nigeria’s Growth on US Rebound
Experts in the Nigerian financial service sector have stated that a recent comment made by the Chairman of the Board of Governors of the Federal Reserve System in the US (The Fed), Ben Bernanke, that he appreciated the concerns about the long run growth prospects of the US economy, would boost the Nigerian economy. Experts at FSDH Securities Limited, in their weekly review of the economy and the financial sector, noted the strategic importance of the US economy to the global economy, and particularly for Nigeria. According to FSDH, “The US contributed about 35.87 per cent to the total oil exports of Nigeria in 2010. This means that the economic developments in the US directly affect Nigeria’s ability to generate revenue from oil. We believe that the stability of the US economy will augur well for the global market place and bring about a positive carry-on effect on investors sentiments and risk and return considerations.” Bernanke, had after weighing-in on the recent economic conditions of the US and the recent downgrade of its sovereign rating by one of the foremost rating agency in the world, said that he appreciates the concerns about the long run growth prospects of the US economy adding that although critical problems certainly exist in the US economy, the growth fundamentals of the US do not appear to have been permanently altered by the shocks of the past four years. The Fed Chairman made this assertion at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, United States in a paper titled ‘The Near Term and Long Term Prospects of the US Economy’. He added that, although it may take some time, he expects to see a return to growth rates and employment levels consistent with the underling fundamentals of the US economy. In addition, he noted that the global economy has seen significant growth, led by the emerging economies. He said the US recorded a cyclical recovery, though a modest one by historical standards is in its ninth quarter. Bernanke revealed that the US banking system are generally much healthier now, with banks holding substantially more capital. According to him, “Credit availability from banks has improved; importantly, structural reform is moving forward in then financial system with ambitious domestic and international efforts underway to enhance the capital and liquidity of banks. In the broader US economy, manufacturing production has risen nearly 15 per cent since its trough, driven substantially by growth in exports.” He added that the US trade deficit has been notably lower recently than it was before the crisis, reflecting in part the improved competitiveness of US goods and services. The Fed Chairman; however, noted that the economic healing in the US will take a while, and there may be setbacks along the way. Moreover, the US needs to be alert to risks to its recovery, including financial risks. On their part, analysts at Cowry Assets limited said finance minister, Dr. Ngozi Okonjo-Iweala’s economic blueprint tilts more in favour of economic growth in the medium term to long term and by implication, a recovery of the capital market. Cowry Assets pointed out salient points, which included the resolve for economic diversification, infrastructural development, debt management, administrative overhaul, deregulation and fiscal restructuring. “While these are pointers to a more vibrant economy, the short term outlook for the capital market remains bearish as critical variables still points towards tighter monetary policies, which always trigger divestment from equities to the fixed income segment. “More so, we remain cautious of the prevailing coarse sentiment on the banking sector as the recapitalisation of the rescued banks awaits September deadline hence our investment strategy remains anchored on medium to long term investment horizon, “the analysts said.