CBN projects growth on the back of interventions
By Jeph Ajobaju, Chief Copy Editor
Nigeria’s economy is projected by the World Bank to grow 2.5 per cent in 2022 and 2.8 per cent in 2023, both forecasts short of anticipation by the Central Bank of Nigeria (CBN) that the largest economy in Africa will rise 3.2 per cent this year.
The World Bank announced its projection in its Global Economic Prospects report where it also said global growth could decelerate from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023.
It cited dissipating pent-up demand and curtailment of fiscal and monetary support across the world.
CBN Governor Godwin Emefiele disclosed his own 3.2 per cent estimated growth at the last Monetary Policy Committee (MPC) meeting in Abuja in December.
Nairametrics reports that statements of MPC members are a reliable source of information on the mindset of those who oversee Nigeria’s policies on combating inflation, managing money supply as well as foreign exchange (forex or FX).
Emefiele – forecast upgraded
Emefiele said growth forecast was upgraded to 3.1 per cent in 2022 on the back of several interventions taking place.
“Though vulnerability remains due to the persistent effects of COVID-19, the Nigerian economy is projected to strengthen in the near-term.
“With the nearly 2.9 per cent growth estimated for 2021q4 and the better-than-expected 2021q3 outcome, CBN growth forecast for 2022 was upgraded to about 3.1 per cent as against a contraction of -1.92 contraction in 2020,” he explained.
The CBN is focused on fast-tracking growth “above historic levels”, he added, which suggest a region of 6 to 7 per cent last recorded in the early years of the Good Jonathan administration.
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Below are other comments Emefiele made on economic prospects in 2022.
Focus on ‘what is working’
“Our medium-term goal is to fast-track growth above historic average. Economic activities may reach pre-pandemic levels if the resilience of non-oil activities (especially agriculture and manufacturing sectors) are given continued impetus.”
Structural reforms
“Extensive structural reforms are also needed to ensure that long-run paths of growth surpass potential.”
Improvement in livelihood
“As business sentiments brighten, following our various supply-side support and orderly implementation of macroeconomic policies, l expect domestic fragility to diminish with benign knock-on effects on welfare and livelihood.”
Inflation
Short-term projections indicate further moderations in expected inflation, especially as development financing continues to resolve supply rigidities.
Below are comments other MPC members made on economy outlook in 2022.
Adamu Lametek – exchange rate
“Apparently, the revised FX management strategy, which excludes BDCs from direct sales, is working as a substantial share of FX demand has migrated to the DMBs’ window.
“We should expect this pattern to continue in the coming months as confidence in the modified framework grows.”
Mike Obadan – impact of oil subsidy removal
“Perhaps, when petrol subsidy is eliminated sometime [in 2022], as the federal government has indicated and Dangote Refinery starts to meet domestic needs for fuel, foreign exchange reserves will be significantly boosted to enhance exchange rate stability through increased interventions by the Bank in the foreign exchange market.
“The rate is still too high and impacting negatively on living conditions of the people.
“Importantly, with the price of oil maintaining an upward trend and translating into overall high cost of energy, high cost of local production and importation, the expected moderation in prices could be dampened.
“Also, depreciation of the naira, uncontrolled fiscal deficits and the planned removal of fuel subsidy before the end of June 2022 are potential threats to inflation control.”
Obadan anticipates increase in interest rates abroad could trigger capital outflows from Nigeria
In other words, market sentiments and the potential hike in short and long-term interest rates abroad could lead to capital flight from Nigeria, as investors seek more rewards for their investments.
The impact on external reserves, exchange rate, the balance of payments, and foreign borrowing costs could be substantial.
Kingsley Obiora – effect of 100 for 100 policy on productivity
“I support the current effort of the Bank for introducing the 100 for 100 Policy on Production and Productivity (PPP).
“The policy will boost production in the manufacturing sector, reduce imports and expand the non-oil exports, improve accretion to external reserves, and ensure exchange rate stability.”