Pre-election spending to spur inflationary pressure in 2022

Inflationary pressure is expected to bounce strongly in 2022, driven by pre-election spending and resulting in a liquidity boost for the economy, Biodun Adedipe, chief consultant, B. Adedipe Associates (BAA) Limited, said on Tuesday.

Nigeria’s headline inflation on Monday accelerated for the first time in 9 months, settling at 15.63 percent in December 2021, from 15.40 percent in the previous month, data from the National Bureau of Statistics (NBS) show.

“To some extent, inflationary pressure will still be there because it is a pre-election year. Normally spending for electioneering campaigns and all of that will make liquidity, it may not lead it to surfeit per se, but we expect liquidity to the system go a little higher and that will trigger some inflationary pressures. It will not go completely out of hand because the economy is also growing,” Adedipe said.

Adedipe spoke at the 8th National Economic Outlook on the Implications for Businesses in 2022 organized by The Chartered Institute of Bankers of Nigeria Centre for Financial Studies in collaboration with B. Adedipe Associates Limited.

He said inflation spikes correlate with recessions of 2016 and 2020. With inflation rate trending downwards, he said the Central Bank of Nigeria (CBN) is not under pressure to raise the Monetary Policy Rate (MPR). Moreover, the economy is desperate for growth.

Inflation rate is expected to moderate, but still double-digit (removal of oil and electricity subsidies), he said.

On Gross Domestic Product (GDP) projections, he said available projections 3.23 percent by (BAA), 4.2 percent (FGN/NBS), 2.7 percent (IMF) and 2.5 percent (World Bank) are unanimous about positive GDP growth in 2022, improvement over 2021.

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According to him, the lending rate will remain double-digit, while continuing pressure (relentless imports and shrinking capacity to pay foreign bills) will likely force the CBN to further devalue the Naira.

Improvement in infrastructure will positively impact the cost of doing business and improve government revenue in the near term, he said, emphasizing on intensified digitalization and ascendancy of the digital economy.

Welcoming the participants, Bayo Olugbemi, president/Chairman of Council, CIBN, said, “as we usher into the pre-election year, this event is very vital as it enables us gain insight into the impact of the year on several economic indices as well as to help us undertake a comprehensive assessment of the opportunities, challenges and indeed the threats that businesses may encounter during the current year.

He urged every organization to be fortified with adequate information to give them insights into what the year 2022 holds. This will undoubtedly serve as a guide in making informed decisions critical to the growth of businesses and in reviewing strategic plans as the need may arise.

Olugbemi noted that the past year has been an eventful one. Developments worthy of mention include the ban on bank operations with regards to cryptocurrency trading, the launch of the e-Naira Central Bank Digital Currency (CBDC) and the provision of vaccinations to guard against the scourge of the COVID-19 virus as well as its various mutations which emerged over the same year.