•Projects slow GDP growth
•Interest rates to remain elevated
By Elizabeth Adegbesan
Afrinvest Limited has projected that the proposed removal of fuel subsidy in 2023 will lead to further pressure on the inflation rate.
The investment firm gave this projection at an investor parley with the theme: ‘Soft or Hard Landing’, in Lagos, noting that the inflation rate would moderate in the first six months of 2023 to 16.2 percent if fuel subsidy is retained.
Among other things, the company projected a slow slowdown in GDP to 2.8 percent; exchange rate of N850 per dollar; and interest rates elevation at 19.5 percent in the first six months of 2023.
Speaking at the event, Group Managing Director, Afrinvest West Africa, Ike Chioke, said the event was to engage with clients on the 2023 outlook from the investment perspective.
He said that issues around inflationary trend, Covid-19, commodity prices, Russia and Ukraine war, among others, are key considerations in investing in the new year and investors have to be guided to explore opportunities presented by these key events around the world.
“These happenings have made investment experts come together to look at our own crystal ball of what we see from an investment perspective next year. The interaction is giving us the rationale to talk to our clients to tell them to be well positioned for the market come 2023.”
Speaking on the domestic macroeconomic review and outlook, Chief Business Officer, Optimus by Afrinvest, Mr. Ayodeji Ebo, said: “Price level is projected to abate due to the high base effect. However, subsidy removal could further accentuate inflationary pressure in the near to medium term if implemented.
“While major quantitative factors (money zero maturity, reserves, inflation) may not justify this outlook, qualitative factors (speculations, political events) are largely responsible for lingering FX pressure.”
On projections for interest rates and GDP, he said: “The CBN is expected to keep interest rates elevated in 2023, clearly not to address inflation (as the money supply is growing) but to attract hot money. This is still far from being achieved.”
He noted that a high interest rate may present a negative position to the borrower but looking at it from the investor’s perspective, it means higher returns, which will reduce the bleeding that most investors suffer as a result of higher inflation.
He further said: “Nigeria’s growth will remain on the backfoot due to a plethora of uncertainties, ranging from low oil production, exchange rate risk, low investment, and less impressive consumption spending; It does not bode well for GDP-related metrics.”