FBNQuest Research projects that Nigeria’s economy will grow by 2.7% this year. The steady growth and modest gains for equities were among the main talking points discussed on the webinar hosted by the investment banking and asset management subsidiary of FBN Holdings Plc designed to elaborate on its 2022 outlook report published in January 2022.
With the theme “A gentle but steady recovery”, the outlook note captured the firm’s view on the Nigerian economy, socio-political environment, traditional asset classes (fixed income and equities) and private capital flows in 2021 as well expectations for the current year.
FBNQuest forecasts that as the second term of Nigeria’s President, Muhammadu Buhari, winds down, the achievements of the administration have been mixed, citing the progression of the Petroleum Industry Act, the 2020 and 2021 Finance Acts, and some infrastructure development as notable achievements.
Ahead of the 2023 general elections, FBNQuest Research anticipates that the withdrawal of monetary accommodation and other tightening measures by the US Federal Reserve and other advanced economy central banks may weaken emerging and frontier market currencies. However, since Nigeria did not benefit substantially from capital inflows tied to monetary accommodation in 2020, the firm said that it is unlikely that capital outflows that could put pressure on the local currency would be significant ahead of the polls.
FBNQuest Research, therefore, anticipates that the naira will depreciate modestly in 2022 as probable multilateral loans, an oil price above $65/b, and an anticipated increase in crude oil output levels provide some level of support. Nevertheless, they forecast a Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX)rate of N445/$ at the end of 2022.
With respect to non-oil sector growth, the report highlights the structural factors that have limited the growth of the agriculture sector. However, it also points to notable achievements in 2021 in relation to rice production and the increase in domestic production of fertilisers.
The investment banking group’s analysts expect growth in the cement and FMCG sectors despite the impact of inflation and unemployment on the purchasing power of consumers. The report also highlighted the growing momentum of investments into the Africa tech ecosystem, including Nigeria, in 2021 and noted the firm’s expectation that the trend will continue in 2022.
With regards to asset values, FBNQuest forecasts another positive year for equities in 2022, projecting gains between 5 and 10 percent. A number of banks, as well as non-financial stocks, are expected to outperform in 2022. These include Access Bank, Zenith Bank, GT Bank, SEPLAT, Presco, and MTN Nigeria.
In the fixed income market, FBNQuest forecasts higher rates supported by tighter monetary policy, which will include two increases of 50 basis points in the Monetary Policy Rate of the central bank, starting with the committee’s next meeting in March 2022.
