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By Omodele Adigun
As 2022 unfurls what it has in stock for Nigerians, the projected $500 million accretion to the external reserves in six months, the launch of Nigerian International Financial Centre (NIFC) at Eko Atlantic City, Lagos, during the second quarter of the year as well as forecast of plunge in inflation, as predicted by the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, are the top expectations in the banking / finance sector this year. Here are why they are on the front burner.
CBN moratorium
Barring any last-minute shift, the extension of the moratorium on principal repayments for the Central Bank of Nigeria (CBN) intervention loans expires in March 2022.
Emefiele disclosed this in his address at the November 2020 and 2021 Bankers’ dinners in Lagos. Penultimate year, he had said that as part of efforts “to restore stability to the economy by providing assistance to households and businesses severely affected by the pandemic, stimulate economic activities through targeted interventions in critical sectors such as agriculture, manufacturing, electricity and construction , some of these measures we took include a one-year extension of the moratorium on principal repayments for CBN intervention facilities”. And last year, he stated: “Extension of the moratorium on principal repayments for CBN intervention facility [is] to March 2022.”
NIFC kicks off Q2
Emefiele, while addressing the 14th Annual Banking and Finance Conference in Abuja on September 14, 2021 said:” A key challenge to supporting growth in key sectors of our economy is access to large pools of cheap investment capital. Today over $100 trillion is held by institutional investors in OECD countries, most of it invested in low yielding assets relative to high yielding opportunities in Nigeria. Working to tap into this pool of funds will require the set-up of an investment framework that offers comfort and security to investors seeking to invest in critical sectors of our economy. In this regard, the Central Bank of Nigeria is working to set up an International Financial Center at the Eko Atlantic City in Lagos that would serve as a hub for attracting domestic and external capital which is needed to strengthen our post covid economy. The International Finance Centre, when fully operational in the second quarter of 2022, will help to position Nigeria as a key destination for investment in Africa.”
Real GDP
Basking in the euphoria of performance of the apex bank under his watch, particularly on policy measures to cage COVID-19, Emefiele forecast that “with continued strengthening, real GDP could recover beyond the pre-pandemic levels by the first quarter of 2022.” He hinged his optimism on output growth rate projected to remain positive from 4.03 per cent in Q3 2021 to nearly 2.91 per cent in Q4 2021, implying a total growth of about 3.10 per cent for 2021. Output growth rate for the Nigerian economy is broadly estimated by key institutions to consolidate in 2021. The IMF and the World Bank project real growth rates of 2.6 percent and 2.4 percent, respectively while the estimate by the Federal Ministry of Finance and National planning stands at 3.0 per cent.”
Earlier, he explained that the CBN worked with the fiscal authorities in instituting strong policy support measures capped under the Economic Sustainability Plan (ESP), which was designed to contain the effects of the pandemic, restore stability to the economy by helping households and businesses affected by the pandemic and to lift our economy out of the woods through massive interventions to critical sectors.
“As a result of these measures, we witnessed robust economic recovery as GDP growth stood at 4.03 per cent in the 3rd quarter of 2021, following the 5.01 per cent growth recorded in the second quarter of 2021. The economy has remained on a positive growth path for four consecutive quarters after the recession in the 3rd quarter of 2020. Forty one, out of the 46 sectors, assessed in the 3rd quarter by NBS, recorded positive growth, as growth was driven by significant improvements in the non-oil sector, particularly agriculture, manufacturing, trade, ICT, construction, finance and transportation. We have also witnessed a gradual recovery in manufacturing output growth as the manufacturing PMI index rose to 47.3 points in October 2021 from 44.9 in January 2021.
Business confidence
He also forecast that overall business confidence index is projected to rise significantly from -9.2 index points as at end-August to over 37.7 index points in November 2021 and surpass 57.6 index points by mid-2022.
Inflation
The CBN boss also predicted a fall in the headline inflation rate to 14.91 per cent by February 2022 from 15.35 per cent projected for December 2021. “Core inflation is equally forecast to fall from 13.74 per cent in October 2021 to 13.39 per cent in December 2021 and further to 12.68 per cent by February 2022, while food inflation falls from 19.57 per cent to 17.26 per cent and 16.58 pe rcent over the same period. Domestic disinflation is projected on the backdrop of the favourable impact of the various CBN interventions on the real sector and the gradual upscale of economic activity, which is expected to keep prices moderate in the near-term.”
External reserves
“Foreign exchange reserves is also predicted to witness $500 million accretion within six months, based on the in-house analysis and simulations of the CBN.” Emefiele added that the external reserves could surpass $42 billion by mid-2022 from the $41.5 billion during the Q3 of 2021, based on the dynamics of oil price and foreign exchange demand for import. “Generally, external reserves is expected to be at relatively comfortable levels with expectation of sustained trend of current crude oil price, the impact of Eurobond Issuance, and stable exchange rate condition,” he added.
