Fuel subsidy, inflation, electioneering to drive economic policies in 2022 – Analysts

Analysts at United Capital Research have said, electioneering, possible removal of fuel subsidy and inflation rate will be key divers of implementing economic policies in 2022.

“Overall, we expect multiple factors to shape the economy’s direction in 2022. To mention a few, we expect electioneering activities and the potential removal of fuel subsidy to be key drivers of implementing economic policies, coupled with economic fortunes regarding inflation and monetary policy”, said United Capital.

We project economic growth of 1.6 per cent year -on-year (y/y), buoyed by a decent recovery in the oil sector from a two-year-long recession, as an increase in the Organisation of Petroleum Exporting Countries (OPEC)’s production quota and the low base effect will drive growth. In addition, we expect sustained growth in the agricultural and services sectors, supported by strong demand for food and improved internet adoption amid the roll-out of the 5G network.

On price movement, they anticipate inflationary pressures to weigh on the market as the high base effect wears off and the true impact of imported inflation reflects on the headline inflation numbers.

“As a result of price pressures and policy normalisation in the global economy, we anticipate a hawkish policy tone from the Monetary Policy Committee (MPC)”, they group said.

Looking back, United Capital recalled that, in the absence of lockdown measures in 2021, the Nigerian economy recovered significantly from the recession and low output growth in 2020. In real terms, Gross Domestic Product (GDP) grew by 0.5 per cent, 5.0 per cent and 4.0 per cent in Q1-2021, Q2-2021 and Q3-2021 respectively compared to estimates of 1.9 per cent, -6.1 per cent and -3.6 per cent in the first quarter of 2020, second quarter of 2020 and Q3-2020. Inflationary pressures persisted in Q1-2021, with Consumer Price Index (CPI) reaching a record high of 18.2 per cent y/y in Mar-2021. However, the pressures simmered by the end of H1-2021, and inflation began to take a downtrend as the high base impact from 2020 kicked in.