Rewane Predicts That Nigeria’s Inflation Rate Will Remain High In 2022

Rewane Predicts That Nigeria's Inflation Rate Will Remain High In 2022.
Rewane Predicts That Nigeria's Inflation Rate Will Remain High In 2022.

Bismarck Rewane, CEO of Financial Derivatives Company, the country’s inflation rate will remain structurally high in 2022, with a full-year average of 13.3 percent.

Rewane made the remarks on Thursday at the Nigerian-British Chamber of Commerce (NBCC) January breakfast meeting in Lagos.

Nigeria’s inflation rate fell marginally to 15.40 percent in November 2021, down from 15.99 percent in October — the 8th consecutive monthly decline and the lowest inflation rate recorded in 2021.

This week, the National Bureau of Statistics (NBS) is expected to release the final inflation report for 2021.

Rewane forecasted that economic activity in 2022 would be similar to that of 2021, owing to global inflationary trends associated with COVID-19, such as the lingering global supply shortage.

“We can expect to see ongoing cost-push factors, such as the planned removal of fuel subsidies, new electricity tariffs, and additional taxes, as well as legacy issues such as increased debt service burden and exchange rate conversion.” “Inflation will remain structurally high at 13.3 percent on average, with an increase in Q1 and Q2,” Rewane predicted.

Despite its continued reliance on oil, the economist noted that the country’s economic outlook is not bleak.

He forecasted 3.4 percent growth in Nigeria’s economy in 2022, based on sustained growth in the information and communications technology (ICT) and financial services sectors.

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“By 2022, Nigeria would be richer and better off, and key sectors to drive the expected growth are ICT and financials, because other sectors use it to drive productivity,” he said.

“The economy will see a 90 percent increase in e-payment, as well as increased technology and digitisation.”

According to Rewane, Nigeria’s gross external reserves will fall to $39 billion as the Central Bank of Nigeria (CBN) increases foreign exchange supply and allows naira convergence.

He went on to say that the government would increase borrowing to meet deficit financing needs, which could lead to a sovereign debt default.

“The World Bank forecasts 2.5 percent economic growth for Nigeria, with a 3.4 percent annualised growth rate, driven by the ICT, Financial Services, Manufacturing, Trade, and Construction sectors,” he said.

“Government spending will rise, owing primarily to election spending, and the naira will effectively appreciate in the informal market.”

According to Bisi Adeyemi, president of NBCC, the purpose of the event was to look at the opportunities and challenges that businesses should expect in 2022.

In his remarks, British Deputy High Commissioner to Nigeria Ben Llewellyn-Jones reiterated the UK’s commitment to strengthening existing trade relations, including its continued support for Nigeria’s efforts to diversify its economy and open up new areas for potential investment.