By Peter Egwuatu
The Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane, has said that higher interest rates are likely to weigh on stock market performance in 2022.
He stated this in a virtual presentation titled, ‘‘Nigeria’s Economic Outlook for 2022”, adding that “Interest rates on fixed income securities are likely to rise in 2022. We are likely to see monetary policy tightening and increased borrowing to fund the 2022 budget. The FGN debt securitization is estimated at N10 trillion ($24.2 billion).”
He said inflation is likely to rise before falling towards the end of the year and reducing the negative real rate of return.
On sectors that will drive growth in 2022, he tipped the Information Communication Technology, ICT, stating: ‘‘The internet penetration to increase to 150million; The emergence of Payment Service Banks (PSBs), fintech revolution and increased broadband penetration will boost financial services sector performance.’’
Speaking further, he said, ‘‘Transportation is another sector.
Increased capital expenditure on road and rail infrastructure will boost the sector. We also have manufacturing sector- Shift to backward integration will boost raw material supply and change in exchange rate mechanism. There is also trade- Sector to benefit from improved economic activities. We have the agric sector as well. An efficient rail system will ease logistics constraints and boost productivity in the sector.
Rewane, further lamented the declining foreign inflow, stressing that foreign portfolio investors exit due to political uncertainties and rising global interest rates.
According to Rewane, “Nigeria’s business environment remains fragile as investment activity will suffer amid project delays, low real rates of return and policy uncertainty. Travel restrictions, capital controls and supply chain disruptions will continue to limit business activity in the near term. Foreign exchange earnings and fiscal revenues will be slow to recover in line with oil price movements and the hydrocarbons production outlook.
Corruption and unpredictable border control measures raise costs and legal risks for investors and Limited fiscal space, slow reform momentum and political risks will preclude rapid improvement in the business environment.”
On the 2022 outlook, he noted that even though markets are consolidating, intensity of rivalry will increase. He added: “New investors likely to remain cautious to the election coming up next year. The increased investment by existing players to raise entry barriers and competition within certain industries will intensify as players build barriers to entry. Marginal players likely to fizzle out new initiatives and investments in the retail space.
The new frontiers will open up particularly in the Fintech space and competition among private educational institutions particularly private universities.”