Bismarck Rewane, managing director and chief executive officer at Financial Derivatives Company, has said the global recession expected in 2023 will have negative spillover effects on Nigeria’s business environment.
This comes after nearly two-thirds of the chief economists surveyed by the 2023 World Economic Forum forecast a global recession this year, despite being optimistic about inflation and strong balance sheets.
“We have seen massive increases in interest rates and a consequence of that is we will see a recession in 2023 but not a deep one instead shallow,” Rewane said at the Nigerian-British Chamber Of Commerce’s (NBCC) 2023 Economic Outlook on Thursday.
He said the spillover effects of the recession will be brutal for poor countries. “Notwithstanding, Nigeria’s economy is not likely to experience a recession but an economic slowdown is unavoidable.”
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The renowned economist added that the global recession will trigger layoffs, fall in income, and a decline in consumption, investment demand and spending.
Others are slack sectoral activities performance, corporate mortality and heightened risk of loan default and non-performing loans for banks.
The financial expert projected that the economy will achieve a 2.7 percent Gross Domestic Product (GDP) growth rate in 2023, due to the forthcoming elections. “Nigeria’s economic outlook is looking gloomy as macroeconomic distortions heighten.”
Last year, the Russia-Ukraine war impeded productive activities in Nigeria as the economy grew at its slowest pace in 15 months in the third quarter.
According to the National Bureau of Statistics, the country’s GDP grew by 2.25 percent (year-on-year) in real terms in Q3 2022, down from 3.54 percent in Q2 and 4.03 percent in the same period of 2021.
Rewane believes that the Central Bank of Nigeria will maintain its previous benchmark interest rate, also known as monetary policy rate (MPR) in its next meeting set to take place next week.
“There may not be any hike in the interest rate as nobody makes major policy changes 30 days to elections,” he said.
Last year, the apex bank increased the MPR four times by 500 basis points to 16.5 percent as a result of the surge in inflation.
“Interest rates will remain high in 2023, likely to peak at the end of the first quarter; higher interest rates likely to weigh on stock market performance; and the gradual loosening of the monetary conditions is expected in the second quarter,” he said.
During her welcome address, Bisi Adeyemi, president of NBCC, said their outlook event undertakes a comprehensive assessment of the opportunities, challenges, and indeed, the threats that businesses should expect to contend with during the year, both in the country and globally.
“It discusses policy approaches that could be used to improve economic growth and development,” she said.
She added that the event is in alignment with their cardinal mandate as a chamber and their commitment to continue to elevate the value proposition to our members and all our stakeholders.
