January 18, 2022/CMC Connect

2022 will be a critical year for economies across the globe as they navigate through inflation and Covid-19 invested waters.

As major central banks across the globe tighten monetary policy, this may have ramifications on global and emerging markets. Although Covid-19 cases across the world continue to rise, many major economies remain on a fragile road to economic recovery. For Nigeria, the economy is enjoying a period of easing inflationary pressures with the latest figures rising 15.63% in December after eight straight months of decline. Ultimately, Africa’s largest economy still remains exposed to the same external and domestic risks. Externally, oil price volatility, developments revolving around Covid-19, China’s economic growth and tightening financial conditions among other factors. Domestically, high unemployment, fragile business environment, shaky macroeconomic conditions, dollar scarcity and uncertainty ahead of the 2023 general elections could threaten growth.

The World Bank has projected that Nigeria’s economy will expand 2.5% in 2022 while the International Monetary Fund (IMF) is slightly more optimistic forecasting 2.7%. These projections are below the 4% expected by the Federal Government (FG). The burning question is whether Nigeria will be able to hit that 4% target or experience growth closer to what the World Bank and IMF believe. With Brent recently jumping to levels not seen in more than seven years, this is a welcome development for Nigeria. The country remains heavily reliant on oil which accounts for over 90% of export earnings and 70% of government earnings. Rising oil could cushion some of the damage created from the other negative themes weighing on the country but the question remains for how long?