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January 31, 2023/Coronation Research

Based on series of projections, global GDP growth is projected at between 1.5–2.8% in 2023. The factors influencing these forecasts are similar. They include fragile economic conditions, higher-than-expected inflation figures, abrupt spikes in interest rates, subdued investments, a resurgence of the COVID-19 pandemic, and escalating geopolitical tensions. Global GDP growth is expected to pick up in 2024 but likely to remain below the pre-pandemic level.

Inflation: lower, but still elevated at double-digit In Nigeria, we expect the headline inflation to moderate in 2023, partly due to positive base effects and the MPC’s current stance on the policy rate. However, persistent supply shocks on the back of the on-going Russia-Ukraine crisis as well as structural issues impacting the cost of doing business such as insecurity and other logistical challenges would likely keep inflation elevated.

Expected rise in FGN bond yields Conside ring the maturity profile of current FGN debt instruments, liquidity could improve in H1’23. However, we expect continuous tightness in the interbank market as the FGN front-loads domestic borrowing in 2023 due to its projected budget deficit and our expectations of low activity with regards to external borrowing. Furthermore, we do not expect access to loans via multilaterals. The expected demand and supply dynamics of FGN debt instruments in 2023 point towards upticks in yields in the domestic debt market.

2023 Elections

In this report, we have taken a deep dive into potential implications of the imminent change in administration. For this analysis, we considered othree frontline candidates. In developing our view, we focused on select macroeconomic indicators and policies. Active steps including effective implementation of reforms and policies are required to navigate the current hazy macroeconomic environment and as such, the new administration must be ready to roll-up its sleeves and apply the right economic and policy tools that would serve as defibrillators to resuscitate weak areas of the economy and the business terrain.

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