Nigeria’s external balance to improve as oil receipts normalise – Sigma

Sigma Pensions has predicted that improved oil output would upturn Nigeria’s external balance through 2022. This was disclosed in a recent report by Sigma Pensions titled, ‘Nigeria 2022 Outlook: Consolidating on recovery but persisting large imbalances present headwinds’ The report also noted that the investment landscape in 2022 will be shaped by normalisation in global […]

Sigma Pensions has predicted that improved oil output would upturn Nigeria’s external balance through 2022.

This was disclosed in a recent report by Sigma Pensions titled, ‘Nigeria 2022 Outlook: Consolidating on recovery but persisting large imbalances present headwinds’

The report also noted that the investment landscape in 2022 will be shaped by normalisation in global economic growth and tighter global monetary policy.

Also, that OPEC+ would complete crude oil market rebalancing as oil prices stay range-bound.

The report forecasts that Nigeria’s growth will stabilize, but the twin deficits to persist as well as wider FX market premiums due to limited USD supply and import demand suppression and higher fuel prices to reignite inflationary pressures.

According to the report, “We expect the oil sector to exit recession in 2022 as Nigeria’s crude production rebounds from the 1.6mbpd low base in 2021 towards a range of 1.8-1.85mbpd and as most OPEC+ curbs are removed by May 2022.

“Given our price and production expectations, we expect Nigeria’s external balance to improve as oil export receipts normalize to trend levels amid persisting import demand suppression on account of the CBN’s currency policy.”

On the economic front, the report forecasts Nigeria’s economic growth to stabilize around 3.4 per cent in 2022, reflecting improvements across telecoms, trade, manufacturing, and oil.

It further added that a large fiscal borrowing plan and higher political risk premiums are expected ahead of the 2023 general elections.

For the equity markets, the report estimates bearish trends dominating market sentiments as the fixed income optionality becomes available to investors after a two-year hiatus and as political risk premiums on Naira risk assets heighten ahead of the 2023 general elections.

It noted that the expectations are that the domestic institutional investor support in bellwether names continue to curtail the downside to the overall market.