According to the bank, increased forex demand due to the need for safe-haven currency (USD) on the back of security concerns, as well as expected weak portfolio investment inflow on the back of negative real returns (yields vs inflation) and the political risks surrounding the 2023 general elections, are concerns for the economy.
The bank, in its 2023 Economic Review and Outlook report, which focuses on trends for core macroeconomic indicators and relevant emerging policy themes that will shape 2023, also noted that there is also the possibility of a devaluation in H2 2023 on the back of liquidity constraints.
Themed ‘Baton Hand-Off: Economic Headwinds and Expected Resilience’, the report covers global economic headwinds and growth trends, inflationary pressures and expectations, dynamics in the domestic oil market, exchange-rate expectations, thoughts around monetary and fiscal policies and sectoral trends, among others. The report also takes a deep dive into potential implications of the imminent change in administration.
Commenting on this report, Banjo Adegbohungbe, MD/CEO of Coronation Merchant Bank stated that ” the impact of recent global economic shocks on the Nigerian economy were prevalent in 2022 and are expected to persist in 2023. However, there will be opportunities to unlock new growth, particularly in the second half of the year. This report is a potent tool for decision makers which would assist our clients, investors and stakeholders to better navigate the current economic environment and achieve their respective strategic goals.”
Chief Economist of Coronation Merchant Bank, Chinwe Egwim, opined “2023 brings with it a mix of economic conditions. We expect the current inflation trend to persist in both advanced and emerging economies. The resultant effect of monetary policy tightening is also expected to continue but at a reduced pace given the inflation outlook across markets which points towards gradual moderation in H2 2023.
“For Nigeria, FX liquidity constraints are likely to continue in the near-term. It is an election year, there are concerns around demand-pull inflation on the back of expected spending (naira circulation) associated with electioneering.
“However, implementation of the recent naira redesign policy could assist with abating this inflation risk. There are also concerns around policy continuity post-election, as well as an expected lull in economic activity on the back of the transition phase. Nigeria’s GDP growth is expected to maintain its growth trajectory but at a relatively slower pace in 2023.”
