Nigeria Economic Outlook
GDP growth likely accelerated in Q4 2022, as PMI data revealed that business conditions improved at a stronger pace than in Q3. The Central Bank’s demonetization plan has led to a cash shortage, sparking protests that have disrupted activity. Following a lawsuit by various states, the Supreme Court temporarily suspended a ban on the use of old, high-denomination bank notes, leading the government to extend the period to exchange them until 10 April. Meanwhile, on 31 January the president’s request for an NGN 1 trillion (around USD 2.2 billion) loan from the Central Bank to fund the 2022 supplementary budget was approved. In recent weeks, Moody’s downgraded the country’s credit rating to ‘Caa1’ and S&P Global Ratings downgraded the outlook to negative, citing they expected the government’s fiscal position to deteriorate further. In the political arena, the country will hold presidential and legislative elections on 25 February.
Inflation surprised markets on the upside in January, accelerating to 21.8% (December: 21.3%), the highest print since September 2005. Stronger price increases for food drove the rate further above the upper bound of the Central Bank’s 6.0–9.0% target range. Inflation is set to gradually moderate in 2023, but currency depreciation is an upside risk.