CBN may increase interest rate this year, says report
As both local and international business activities have begun operation in 2022, analysts have been given projections and insights on how the year will look like in terms of prospects and challenges especially in the financial sector.
Sigma Pensions revealed that stronger dollar demand will convince the Central Bank of Nigeria of the need to tighten monetary conditions as with the trend across global central banks to manage foreign exchange reserve depletion.
In its report titled ‘Nigeria 2022 outlook: Consolidating on recovery but persisting large imbalances present headwinds, mentioned that the large fiscal borrowing requirements amid less liquid financial system conditions in 2022, relative to the last two years, suggest ample scope for heightened market expectations about higher interest rates.
It said that the oil sector is expected 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 while Nigeria’s external balance is expected to improve as oil export receipts normalize to trend levels amid persisting import demand suppression on account of the CBN’s currency policy.
According to the report, a large fiscal borrowing plan and higher political risk premiums are expected ahead of the 2023 general elections.
