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Access Pension sees insecurity, petrol subsidy, exchange rate shape policy in 2023

Access Pensions CEO sees sector funds help bridge infrastructure gap

As Nigeria heads into the 2023 general elections to vote a new president, experts at Access Pensions Limited says whosever that emerges faces a loaded in-tray, as decisive actions are required on several burning issues including insecurity, petrol subsidies and exchange rate system.

‘From an economic and financial market perspective, we think 2023 is likely to be a tale of two halves with the first half focused on figuring out the identity of Nigeria’s next political leadership team and the latter part about figuring out their policy direction over the next four years, Access Pensions said in its ‘Nigeria 2023 Outlook’.

Nigeria heads to the sixth general election cycle since the return to democratic rule in 1999 and unlike the prior two-way contests, the 2023 polls will likely be a three-way contest between Bola Ahmed Tinubu, the candidate of the ruling All Progressive Congress (APC), former vice president Atiku Abubakar of the main opposition party, the People’s Democratic Party (PDP) and Peter Obi of the Labour Party (LP), the Pension Fund Administrator said.

“Given Nigeria’s weak fiscal position however, our base case scenario is for a partial adjustment to petrol pump prices in 2023 alongside further weakening of the official exchange rate. In response to the elevated inflation levels, we expect monetary policy to remain tight, which alongside large government borrowings, speaks to a higher interest rate environment.”

Unlike in 2015, the winner will likely be facing a much higher oil price environment but will need to tackle a host of issues across insecurity, a growing debt burden, burdensome petrol subsidies and a broken exchange rate system, the PFA noted

“In between the election and transition, we expect economic activities to muddle through the year and see real GDP growth around at 3-3.5 percent in 2023, flattered by a recovery in oil output from the depressed theft driven levels of 2022 and stabilization in the non-oil sector.”

Against this backdrop and clarity on the political scene after the elections, we think the CBN could look to improve USD supply within the official segment and tolerate some weakening in the IE window exchange rate towards levels north of NGN500/$.

In the face of potential adjustments to petrol prices and persisting Naira weakness, we expect inflation to remain elevated over 2023 (18 percent-20 percent) which will likely see the CBN retain a hawkish stance on interest rates over the year.

It noted also that 2023 will focus will shift to how central banks respond to potential slowdowns in both inflation and economic growth.

“A soft-landing on the latter, our base view, suggests an end to the cycle of rate hikes but no reversals or rate cuts, however, a hard landing holds out the chance of a dovish turn to monetary policy and a return to easing.”

Read also: Premium Pension achieves N1trn milestone in AUM

Overall, we believe that the investment landscape in 2023 will be shaped by local central banks pulling the plug on the interest rate tightening cycle over 2023.

Access Pensions Limited is a licensed Pension Fund Administrator (PFA), formed from the merger between First Guarantee Pension Limited and Sigma Pensions Limited, and regulated by the National Pension Commission. The Company provides retirement planning, investment management and pension administration services to over 1 million working Nigerians and retirees and has assets under management of over N900billion.

Access Pensions is majority owned by Access Corporation, a leading full service financial corporation with verticals cutting across banking, payments, insurance brokerage, pensions, and consumer lending. We share our outlook for the economic and investment landscape in 2023.