Connect with us


IMF Trims Global Growth and Raises Nigeria’s Growth Outlook



Lagos Nigeria - Investors King

In its latest World Economic Outlook (WEO), the IMF has trimmed its global forecast for 2022 to 3.6% y/y from 4.4% y/y. For 2023, the growth projection was revised downwards from 3.8% y/y to 3.6% y/y.

Since the last WEO released in January, risks to economic prospects have risen sharply and policy trade-offs have become more challenging largely because of the Russia-Ukraine crisis which has had visible trickledown effects. Furthermore, frequent, and wider-ranging lockdowns in China have slowed manufacturing activities and are creating additional supply-chain bottlenecks.

Both Russia and Ukraine are projected to experience GDP contractions of -8.5% y/y and – 35% y/y respectively in 2022. The severe downturn in Ukraine is a direct result of the invasion. In Russia, the sharp decline reflects the impact of the sanctions with a severing of trade ties and greatly impaired domestic financial intermediation.

The 2022 forecasts for two of the largest economies, US, and China were reduced. The US global growth was revised downwards from 4.0% y/y to 3.7% y/y in 2022, driven by assumptions such as faster withdrawal of monetary support than in the previous projection given expected policy tightening in an attempt to rein in inflation and the impact of trade disruptions due to the ongoing Russia-Ukraine crisis.

China’s global growth was revised downwards from 4.8% to 4.4% in 2022. The combination of more transmissible coronavirus variants and the strict zero-COVID strategy in China has led to repeated mobility restrictions and localized lockdowns (including in key manufacturing and trading hubs). In addition to slow recovery in employment, these are causing strain on private consumption.

Crude oil prices increased sinceAugust 2021, driven by a strong recovery in oil demand, and then followed by geopolitical tensions (Russia-Ukraine crisis). The oil supply gap was wide before the ongoing crisis, as OPEC+ continued to ease supply curbs at a measured pace.

Global demand for oil is projected to increase to 99.7 million barrels a day (mb/d) in 2022. Meanwhile, oil price assumptions based on the futures markets for the Fund’s basket of three crude blends (UK Brent, Dubai Fateh, and West Texas Intermediate crude oil), shows an increase of 54.7% this year to USD106.8/b and a decline of -13.3% in 2023 to USD92.6/b.

Prior to the Russia-Ukraine crisis, headline inflation had surged across economies due to pandemic-induced supply-demand imbalances. Elevated inflation will affect trade-offs central banks face between combating price pressures and safeguarding growth. Inflation is expected to remain elevated across economies, driven by the war-induced commodity price increases. For 2022, the IMF projects average inflation at 5.7% in advanced economies and
8.7% in emerging and developing economies.

Regarding monetary policy, prior to the ongoing Russia-Ukraine crisis some central banks were tilting towards monetary policy tightening. This contributed to increases in nominal interest rates across advanced economy sovereign borrowers.

The general expectation is that policy rates are set to rise further in coming months. Furthermore, balance sheets for select central banks are also expected to begin to unwind, especially in advanced economies. Although some central banks across emerging and developing economies have raised their policy rate, China seems to be an outlier. China’s headline inflation remains low and its central bank trimmed policy rates in January ‘22 to support economic recovery.

On a broader note, expectations of tighter policy and concerns around the residual effects from the Russia-Ukraine crisis have contributed to financial market volatility and risk repricing. Interestingly, the Fund revised its forecast for sub-Saharan Africa to 3.8% (from 3.7%) for 2022. Higher food prices would adversely affect consumer pockets. In our view, given that wheat is an essential ingredient in the production of bread, pastries, pasta, biscuits, noodles among others, reduced supplier access and higher prices will weigh heavy on wheat-based producers within the region.

For Nigeria, the IMF raised its GDP growth projection for 2022 from 2.7% y/y to 3.4% y/y. This was largely due to the increase in oil prices. Bonny Light has increased from USD80.1/b at the start of the year and has remained above USD100/b. We have a relatively cautious view. Indeed, higher oil prices bode well for Nigeria.

However, the presence of the fuel subsidy regime undermine expected benefits. Furthermore, production volumes have been relatively low. Based on the latest OPEC data, Nigeria’s production volume stood at 1.35mb/d compared to its OPEC approved quota of 1.74mb/d.

There are other downside risks to consider such as the trickledown effect from the Russia-Ukraine crisis which has an impact on supply-chain dynamics and by extension, affects inflation and consumption patterns. On a brighter note, we expect a small fiscal boost with increased capital expenditure which should support GDP growth. We currently see GDP growth for Nigeria at 2.8% y/y in 2022.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading


Federal Government Set to Seal $3.8bn Brass Methanol Project Deal in May 2024




The Federal Government of Nigeria is on the brink of achieving a significant milestone as it prepares to finalize the Gas Supply and Purchase Agreement (GSPA) for the $3.8 billion Brass Methanol Project.

The agreement to be signed in May 2024 marks a pivotal step in the country’s journey toward industrialization and self-sufficiency in methanol production.

The Brass Methanol Project, located in Bayelsa State, is a flagship industrial endeavor aimed at harnessing Nigeria’s abundant natural gas resources to produce methanol, a vital chemical used in various industrial processes.

With Nigeria currently reliant on imported methanol, this project holds immense promise for reducing dependency on foreign supplies and stimulating economic growth.

Upon completion, the Brass Methanol Project is expected to have a daily production capacity of 10,000 tonnes of methanol, positioning Nigeria as a major player in the global methanol market.

Furthermore, the project is projected to create up to 15,000 jobs during its construction phase, providing a significant boost to employment opportunities in the country.

The successful execution of the GSPA is essential to ensuring uninterrupted gas supply to the Brass Methanol Project.

Key stakeholders, including the Nigerian National Petroleum Company Limited and the Nigerian Content Development & Monitoring Board, are working closely to finalize the agreement and pave the way for the project’s advancement.

Speaking on the significance of the project, Minister of State Petroleum Resources (Gas), Ekperikpe Ekpo, emphasized President Bola Tinubu’s keen interest in expediting the Brass Methanol Project.

Ekpo reaffirmed the government’s commitment to facilitating the project’s success and harnessing its potential to attract foreign direct investment and drive economic development.

The Brass Methanol Project represents a major stride toward achieving Nigeria’s industrialization goals and unlocking the full potential of its natural resources.

As the country prepares to seal the deal in May 2024, anticipation grows for the transformative impact that this landmark project will have on Nigeria’s economy and industrial landscape.

Continue Reading


IMF Report: Nigeria’s Inflation to Dip to 26.3% in 2024, Growth Expected at 3.3%



IMF global - Investors King

Nigeria’s economic outlook for 2024 appears cautiously optimistic with projections indicating a potential decrease in the country’s inflation rate alongside moderate economic growth.

The IMF’s revised Global Economic Outlook for 2024 highlights key forecasts for Nigeria’s economic landscape and gave insights into both inflationary trends and GDP expansion.

According to the IMF report, Nigeria’s inflation rate is projected to decline to 26.3% by the end of 2024.

This projection aligns with expectations of a gradual easing of inflationary pressures within the country, although challenges such as fuel subsidy removal and exchange rate fluctuations continue to pose significant hurdles to price stability.

In tandem with the inflation forecast, the IMF also predicts a modest economic growth rate of 3.3% for Nigeria in 2024.

This growth projection reflects a cautious optimism regarding the country’s economic recovery and resilience in the face of various internal and external challenges.

Despite the ongoing efforts to stabilize the foreign exchange market and address macroeconomic imbalances, the IMF underscores the need for continued policy reforms and prudent fiscal management to sustain growth momentum.

The IMF report provides valuable insights into Nigeria’s economic trajectory, offering policymakers, investors, and stakeholders a comprehensive understanding of the country’s macroeconomic dynamics.

While the projected decline in inflation and modest growth outlook offer reasons for cautious optimism, it remains essential for Nigerian authorities to remain vigilant and proactive in addressing underlying structural vulnerabilities and promoting inclusive economic development.

As the country navigates through a challenging economic landscape, concerted efforts towards policy coordination, investment promotion, and structural reforms will be crucial in unlocking Nigeria’s full growth potential and fostering long-term prosperity.

Continue Reading


South Africa’s March Inflation Hits Two-Month Low Amid Economic Uncertainty



South Africa's economy - Investors King

South Africa’s inflation rate declined to a two-month low, according to data released by Statistics South Africa.

Consumer prices rose by 5.3% year-on-year, down from 5.6% in February. While this decline may initially suggest a positive trend, analysts caution against premature optimism due to various economic factors at play.

The weakening of the South African rand against the dollar, coupled with drought conditions affecting staple crops like white corn and geopolitical tensions in the Middle East leading to rising oil prices, poses significant challenges.

These factors are expected to keep inflation relatively high and stubborn in the coming months, making policymakers hesitant to adjust borrowing costs.

Lesetja Kganyago, Governor of the South African Reserve Bank, reiterated the bank’s cautious stance on inflation pressures.

Despite the recent easing, inflation has consistently remained above the midpoint of the central bank’s target range of 3-6% since May 2021. Consequently, the bank has maintained the benchmark interest rate at 8.25% for nearly a year, aiming to anchor inflation expectations.

While some traders speculate on potential interest rate hikes, forward-rate agreements indicate a low likelihood of such a move at the upcoming monetary policy committee meeting.

The yield on 10-year bonds also saw a marginal decline following the release of the inflation data.

March’s inflation decline was mainly attributed to lower prices in miscellaneous goods and services, education, health, and housing and utilities.

However, core inflation, which excludes volatile food and energy costs, remained relatively steady at 4.9%.

Overall, South Africa’s inflation trajectory underscores the delicate balance between economic recovery and inflation containment amid ongoing global uncertainties.

Continue Reading