According to Zawya article published on January 2, 2023, the end of 2022 coincides with the twilight of President Muhammadu Buhari’s second term administration in Nigeria. President Buhari’s administration came to power over seven years ago on a promise to rein in corruption, secure the country, create jobs, and alleviate poverty. CHIMA NWOKOJI takes a look at how some economic indicators performed in 2022 under the watch of the present administration.
2022 will always be a year to remember for many households, businesses, economic thinkers, and policymakers in Nigeria as the year saw blends of economic challenges, ranging from the COVID-19 fiscal stimulus backlash to shocks arising from Russia’s invasion of Ukraine which muted output growth in Nigeria and several other countries; and the far-reaching effect of the blistering monetary policy tightening regime.
In its economic and business environment review for 2022 and agenda for policy makers for 2023, Dr Muda Yusuf, the Director, Centre for the Promotion of Private Enterprise (CPPE), said the political environment has a major impact on economic and business performance.
Inflation
As at January this year, headline inflation was 15.60 percent and rose to a peak of 21.47 percent in November 2022. Meanwhile, food inflation consistently outpaced headline inflation and core inflation during the year. For the basket of goods and services consumed by the average Nigerian, costs have accelerated by between 50 percent and 100 percent in 2022.
According to Dr Yusuf, the inflationary situation was the worst in recent history and the impact on citizens and the Small and Medium scale Enterprises (SMEs) was very devastating. The World Bank reported that five million Nigerians were pushed into poverty in 2022 amid a slump of purchasing power by 35 percent driven largely by surging inflation.
GDP growth
Nigeria’ GDP is valued at over N200 trillion (in nominal terms) as at the third quarter of 2022. It grew by 3.11 percent in the first quarter; 3.54 percent in the second quarter; and decelerated to 2.25 percent in the third quarter. The World Bank projected a growth rate of 3.11 percent for 2022 and 2.9 percent in 2023.
Given the enormity of the macroeconomic headwinds and the numerous fiscal and monetary policy shocks, the Nigerian economy could be adjudged to have demonstrated remarkable resilience in 2022, according to Dr Muda Yusuf.
However, macroeconomic instability, shrinking fiscal space, soaring public debt, heightening inflationary pressures, currency depreciation, foreign exchange illiquidity, surging energy cost, weakening purchasing power, legacy structural constraints, lingering insecurity, and crippling trade facilitation issues slowed down growth.
The following sectors contracted in the third quarter of 2022: crude oil and gas which contracted by 22.67 percent; oil refining contracted by 44.7 percent; coal Mining contracted by 43.5 percent; manufacturing sector contracted by 1.91 percent; food and beverage sector which is one of the most shocking
Foreign exchange management
The foreign exchange (forex) challenge was a major predicament that investors grappled with in 2022. The dimensions of this dilemma, as listed by CPPE, were as follows: sharp currency depreciation; forex market illiquidity, especially at the official window; volatility of the exchange rate, creating considerable uncertainty and unpredictability for investors and transparency issues in the forex allocation ecosystem.
According to the World Bank, the official exchange rates depreciated by 5.2 percent in 2022, as at November, while the parallel market rate depreciated by 40 percent. Parallel market premium widened from 37 percent in January to 71 percent in November 2022. The bank said that “Nigeria exchange rate policy settings are stifling business activities, investment and growth, and amplifying macroeconomic risks.”
Maritime sector issues
The maritime sector is a very crucial sector of the Nigerian economy. It is a sector where reform imperatives have become very urgent. Legacy trade facilitation issues had persisted and become intractable.
