The Managing Director, Morgan Capital Securities Limited Mr Rotimi Olubi has expressed the need for the Federal Government to focus on reducing the leakages associated with the current subsidy and under recovery regime.
Olubi also said that the suspension of oil subsidy removal would dampen the impact of high oil prices in the global market to the Federal government purse.
Speaking in Lagos at a forum organised by Capital Market Correspondents Association of Nigeria (CAMCAN), Olubi said electioneering for 2023 general elections in Nigeria will further increase foreign portfolio outflows and cause Foreign Portfolio Investors (FPIs) to remain on the sidelines.
Olubi who spoke on the theme: “A review of 2021 Market Performance and Factors that will shape it in 2022”, said other factors expected to cause further outflow to include rate hikes and capital controls by the monetary authorities.
Olubi said that inflation was expected to rise further following a direction reversal in December 2021 where inflation rose after an eight month downward trend.
“Although the MPC retained all parameters, they could still be forced to raise interest rate to combat inflation and reduce the negative real interest rate and that is if the U.S decides to raise their interest rate.
“Accordingly, the MPC could be forced to raise Interest rates to combat inflation and reduce the already negative real interest rate,” he added.
“Interest income of financial services institutions such as banks is expected to rise in Nigeria if interest rates rise as expected. This is because the U.S could decide to raise interest rates.
“This act by the U.S could lead to downward pressure on commodity prices, drop in global liquidity, increase in the cost of funds from the international debt market and due to the fact that Ukraine and Russia are still having conflicts, oil prices might go up and production could decrease.
“Companies in the oil and gas sector are expected to have a solid year driven by strong oil prices, increasing global oil demand and OPEC+ cuts,” Olubi said.
