Despite the challenging year, Vetiva Africa projected a growth of 2.7 per cent year-on-year for Nigerian economy.
This was stated in the Pan-African research H2 2022 Macroeconomic outlook for the Nigerian Economy.
According to the report, Vetiva expects the Nigerian economy to grow by 2.7 per cent Y-o-Y in 2022, driven by supportive base effects, volatile oil production, sustained growth in Active GSM lines, and slight depreciation in the Naira.
On the global scale, Vetiva’s SSA Economists, Ibukun Omoyeni and Angela Onotu appraised the fallout of the Ukraine-Russia tensions and monetary policy normalisation; rising inflation, tight financing conditions, risk-off sentiments, and a slowdown in global growth.
“We note that both warring countries are key commodity exporters, and supply disruptions would reverberate globally. With inflation reaching new highs, the Fed’s increasingly hawkish stance, combined with a stronger dollar, poses new challenges for emerging and frontier markets,” they said.
The pan-African research team appraised the impact of the Russian war on African economies.
According to the report, the warring economies (Russia and Ukraine) are responsible for 3.6 per cent of African imports. Despite the little exposure to Ukraine and Russia, constrained supply from these economies means prices of these commodities, most of which are essential, will be elevated.
While the war places immense pricing and external strain on African economies, Vetiva Research noted that, “economies with floating currencies and volatile fuel prices would be adversely affected (Ghana and South Africa), while we could see the increased fiscal strain on economies that operate fuel subsidy regimes (Nigeria, Kenya, and Angola).”
The report attributed the recent decline in the oil sector to crude theft, noting that, “an attack on one of Nigeria’s major onshore (land) terminals, Escravos was responsible for the historic decline in Q1, 2022.”
On inflation, the report stated that, “we see considerable risks from global food shortages, sustained fuel shortages, another energy crisis, higher power tariffs, and weaker exchange rates. Amid these varying outcomes, our base estimate for inflation is 17.50 per cent Y-o-Y in 2022.”
The economists also noted a bear case scenario of 19 per cent, should recurring fuel shortages persist, while on monetary policy, it penned down a 100 to 200bps rate hike in H2, 2022.
Similarly, the economists foresaw room for a slight depreciation in the naira towards N440 per dollar in the Investors & Exporters Window, saying, “we believe adopting a moving NAFEX rate helps prevent the naira from being grossly overvalued before critical adjustments are made.
“Overvaluation of the NAFEX is lower than the defunct de-facto peg of N379/$. Thus, we do not see room for any significant downward adjustments in the official value of the Naira (as it was in 2016).”
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