With the advent of the COVID 19 vaccine and an attendant improvement in investor sentiments globally and domestically, most businesses in Nigeria are optimistic about 2021. While we share in these positive sentiments given a stronger demand for oil and relatively higher crude oil prices in 2021, we believe that some Nigerian businesses will continue to nurse the impact of the pandemic over the medium term. Our projection for Nigeria’s GDP output is a measly 2% in 2021, a growth rate we consider sub-optimal for a country with a population size of about 200 million persons, a population growth rate of about 3% and severe economic challenges.
Although oil prices have rallied in the first two months of 2021, hitting as high as $70 per barrel in March 2021, the country’s reserves have not grown at the same rate. Nigeria’s Eurobond redemption of $500 million and maturing swap transactions, rising costs from refined crude oil importation at a higher landing cost, and the gradual settlement of pent-up FX demand continue to pressure gains from stronger oil prices.
