April 21, 2022/United Capital Research

The global macroeconomic space has been dominated by key global economic institutions’ downward revision of global economic growth expectations necessitated by unanticipated events that have rocked the global economy. First, the World Bank announced a cut in its forecasts by 0.9ppt to 3.2% (from 4.1% in January). According to the World Bank, the downward revision was as a result of contractions expected in Ukraine, Russia, as well as some other European & Central Asian countries. In addition, the inflationary impact on consumer demand as well as hawkish monetary policies are prompting downward revision in some advanced and emerging economies.

Similarly, the International Monetary Fund (IMF) in its April edition of the World Economic Outlook (WEO) announced a 0.8ppt adjustment to its global growth forecast, lowering it to 3.6% for 2022, from 4.4% projected in January. The downward revision was largely the result of Russia’s invasion of Ukraine. The wide-ranging sanctions on Russia as well as moral preference for several countries and companies to sever ties with Russia are key contributing factors. Also, tighter monetary policies and inflationary pressures are key pain points for economic growth. Interestingly, the IMF’s breakdown of regional and country growth showed that European economies are likely to suffer the most. Also, low-income countries who typically have limited fiscal room to cushion the ripple impacts on their economies are likely to face a worse degree of slowdown in economic growth. For context, growth forecast for the Euro Area (down 1.1ppt), Emerging & Middle-Income Economies (down 1.0ppt) and Low-Income Developing Countries (down 0.7ppt) all saw steep downward revisions.

Drilling down to our domestic economy, the IMF revised Nigeria’s economic growth higher by 0.7ppt to 3.4% in what we consider a very optimistic move. Truly, in our note on the Russian-Ukraine crisis, we highlighted how Nigeria may be broadly unaffected due to a heavily subsidised energy sector as well as policy authorities’ preference for accommodative monetary policy tilt. Despite this, we think the IMF’s forecast may be broadly optimistic given sustained slowdown in oil sector output and slowing momentum in PMI readings. We retain our projection of a 2.1% y/y growth in the Nigerian economy.