PwC: Global policies may impact Nigeria’s GDP, interest rate, FX & inflation

A recent report by PwC has shed light on the potential impact of global geopolitical tensions on key aspects of Nigeria's economy such as inflation, foreign exchange, interest rates, and GDP growth. The report outlines three possible scenarios that could significantly influence the country's economic outlook. Olusegun Zaccheaus, a Partner, Chief Economist, and Lead at PwC Strategy for West Africa, appeared on CNBC Africa to discuss the implications of the report. Zaccheaus explained that when analyzing the effects of global policy postures on Nigeria, it is crucial to consider both direct and indirect transmission mechanisms. While the direct impact may not be as substantial due to the country's trade focus on oil and gas, the indirect consequences, such as global economic growth, financial conditions, and capital allocation, could have a more pronounced effect on Nigeria's economy. The report identified three potential scenarios based on global policy developments. If Nigeria faces tariffs or economic penalties, the impact could be negative but not as severe as a targeted policy attack by the United States. Conversely, positive policy negotiations with the U.S. could lead to better trade terms and boost Nigeria's economy. The implications of these scenarios encompass inflation, interest rates, foreign exchange rates, and overall GDP growth. Zaccheaus emphasized the importance of Nigeria's fiscal and monetary authorities in managing the economy amidst global uncertainties. He highlighted the significance of attracting investments to the country and the role of structural reforms in promoting foreign direct investments and sustaining foreign portfolio investments through market-friendly policies. Regarding the Investment and Securities Act, Zaccheaus noted that reducing investment-related friction can enhance Nigeria's market attractiveness. However, he cautioned that global economic uncertainties might impact investor confidence and capital allocation. The optimism lies in Nigeria becoming a compelling investment destination if critical policies are implemented effectively. When discussing the stability of the Naira, Zaccheaus highlighted the correlation between currency movement and external factors like oil prices and capital flows. He suggested that monitoring different scenarios is crucial to anticipating exchange rate fluctuations. While the current monetary policy conditions provide some stability, external shocks could still influence the Naira's performance. In conclusion, Zaccheaus stressed the importance of maintaining fiscal flexibility within Nigeria's budget amid evolving global dynamics. The country's ability to navigate these uncertainties will be vital in safeguarding its economic resilience and attracting investments for sustainable growth.