• Friday, June 21, 2024
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Former LCCI chief expects fragile growth of 3% in 2022

Nigeria’s corporate tax rate, global highest — CPPE

The immediate past director-general of Nigeria’s largest business think tank, the Lagos Chamber of Commerce and Industry (LCCI) Muda Yusuf, says he expects a largely positive growth outlook of 3percent for the Nigerian economy in 2022.

Yusuf’s position is contained in his outlook for the Nigerian economy in 2022, wherein he states that gross domestic product (GDP) growth would remain fragile, but he projects it at the three per cent threshold while listing the key expected drivers of growth to include sustained recovery of global oil price.

“We expect that the average oil price in 2022 will exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom. This would be powered by higher energy demand driven by the recovery of economic activities globally. This trajectory is expected to impact on our foreign reserves and strengthen the capacity of the Central Bank of Nigeria (CBN) to support the foreign exchange market,” Yusuf, now the chief executive officer of Centre for the Promotion of Private Enterprise in Nigeria said.

According to the economist, the impact of the pandemic on the global and domestic economies is beginning to dissipate on account of increased vaccination and other measures to contain the pandemic.

“The capacity of many countries to manage the pandemic has progressively improved with each pandemic experience. Therefore, the shocks of the subsequent variants of the pandemic on the global and domestic economies are likely to be less severe than previous ones. Instances of lockdowns of economies are less likely to be prevalent in 2022,” he noted.

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Yusuf expects Nigeria’s service sector to outpace the real sector in 2022. In the third quarter of 2021, the service sector contribution to GDP was 50 percent and the growth of the sector was 8.41 percent.

He noted that the reason for this was that the service sector is less vulnerable to the structural constraints bedevilling the economy, particularly the real sector of the economy.

“The infrastructure demand in the services sector is much less than that of the real sector of the economy,” he opined.

For Yusuf, the activation of the Petroleum Industry Act (PIA) in 2022 is expected to impact positively on the economic outlook as Nigeria expects to see positive outcomes as investor sentiments in the oil and gas sector improve on account of the reforms anchored on the PIA.

“This will however depend on the political will deployed to drive the implementation of the provisions of the Act. It is also expected that the coming on stream of the Dangote refinery in 2022 will also impact positively on the downstream sector of the economy,” he added.

Yusuf explained that the economic players will grapple with a number of headwinds in the economy in 2022; but these have macroeconomic, policy, regulatory, structural and security dimensions.

He noted the seemingly intractable problem of insecurity, which remains a significant risk to the economy, and said its impact on some sectors, especially the agricultural sector, will be profound.

Yusuf highlighted the concerns about the perception of Nigeria as an investment destination and the implications for Nigeria’s country risk rating.

He also said the monetary and foreign exchange policy rigidities may also pose a risk to the growth outlook as there are no indications of any significant shift in monetary and foreign exchange policy stance in the near term.

“Consequently, the distortions inherent in the foreign exchange market will persist in 2022. The constraining effect of the high Cash Reserve Requirement [CRR] on financial intermediation would also persist in 2022 with a dampening effect on the growth outlook,” Yusuf stated.