The second term of President Buhari has begun almost like the first one. The Central Bank eased its policy rate in March 2019, for the first time since November 2015. This surprise move (-50 bps to 13.5%) indicates a more supportive stance as growth more or less vanished in 2015 and has recovered only gradually in 2018 (+1.9%). Inflation currently stands at +11.3% y/y (in February), above what was observed in 2015 (+9%) when the last monetary easing was implemented. However, two things are very different: the import cover of foreign reserves is now eight months (vs. five months in 2015) and the oil price is relatively stable y/y (it was cut by half in 2015). So, there is a low rationale for a disconnect between the official exchange rate and the black market one. Another support to growth should come from oil output, despite OPEC-agreed cuts, as a result of a new field (Egina) which is coming to production this year. As a result, we expect growth to accelerate somewhat to +2.6% in 2019.
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Weekly Export Risk Outlook 27 March 2019