Global Growth was expected to strengthen significantly in 2022 against the backdrop of the perceived marginal impact of the omicron variants, abatement in supply chain disruptions and expected deceleration in inflationary pressures. However, things turned for the worse as the geopolitical tensions between Russia and Ukraine rattled the commodities market, worsened supply chain bottlenecks, propelled inflationary pressures and heightened uncertainties. As such, major economies witnessed a deacceleration in growth, which is expected to linger in the near term given the aforementioned factors. 

In Nigeria, the oil sector was ridden with continuous divestment in the upstream sector, pipeline vandalism and leakages, poor pipeline maintenance and oil theft. These factors may continue to impede the country’s ability to improve its volume production in line with OPEC’s output expansion in 2022. We opine that the resilience seen in the agricultural sector is not unconnected with the intervention efforts of the CBN. Hence, the sector could maintain its slow growth pattern in 2022 on the back of CBN’s intervention effort. However, insecurity challenges, tough macro environment, electioneering activities, remains key downside risk in that space. Overall, we expect GDP growth to register at around 2.50% in 2022. 

We expect consumer prices to sustain its uptrend in coming months driven by spike in global commodities prices, exchange rate pressure, power outages, PMS scarcity, and rising energy prices. Secondly, the increased money supply usually associated with electioneering activities may further exert pressure on inflation. 

Contrary to our expectations of rising yields at the beginning of the year, we saw rates trend significantly downwards in Q1 2022, (up slightly in Q2 2022). In the coming months, our expectation is for a marginal movement in rates in either direction. We see yields in the fixed income space trading at current levels or at a range of +/-10bps. 

The local bourse began the year with a bullish momentum driven by the trio impact of impressive earnings releases, corporate actions, and unattractive yields in the fixed income space. In H2 2022, we expect the bullish momentum recorded in H1 to be sustained for the rest of year, albeit at a slower pace. 

In the first half of the year, the higher oil price but low reserves conundrum continued to plague the foreign exchange market. Looking ahead, our outlook for reserves and the exchange rate remains biased to the downside due to the poor production capacity, low FPI participation due to rising global interest rates and FX scarcity.

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