Global economists have predicted a 12% inflation rate and an 8.2% economic growth rate for Nigeria in 2022, the third worst inflation rate out of over 32 countries surveyed by Bloomberg.
Nigeria was third from bottom with an inflation rate target at the end of Q4 of 12.1% behind Turkey and Argentina with 21% and 46.7% respectively. In terms of GDP Growth rate, they projected 2.8% growth 9th from Bottom higher than countries like Chile, Mexico, Turkey, Russia, Hong Kong. South Africa and Brazil were next to bottom and bottom respectively.
This is tantamount to a Stagflation which is a combination of rising inflation rate and tepid GDP growth rate. Countries in stagflation find it extremely difficult to exit due to the intersection between inflation and GDP growth rate. Typically, higher inflation rate should be good for GDP growth rate if the inflation rate is single digits.
The report also cites supply chain challenges brought on by Covid-19 and the billions of dollars in stimulus funding as contributory factors to rising inflation across the world. This has forced the Western and bigger economies to consider raising interest rates this year which is likely to impact emerging market economies and frontier markets like Nigeria.
“Ziad Daoud of Bloomberg Economics identified five that are especially vulnerable to rising U.S. rates: Brazil, Egypt, Argentina, South Africa, and Turkey, or the Beasts. (Although President Recep Tayyip Erdogan’s unconventional approach to taming inflation, by cutting rates, arguably puts Turkey in a class of its own.)”
The prediction by a diverse pool of economist indicates the world expect Nigeria to remain in stagflation in 2022, a common feature of the Buhari administration.
Nigeria has suffered high inflation and tepid GDP growth rate in the last 4 years as multiple devaluations, crash in oil prices and the Covid-19 pandemic hampered any effort geared towards economic recovery.
Despite the grim forecast, the CBN believes inflation rate will moderate in 2022 citing their unorthodox policies.
However, critics cite the impending subsidy removal and electricity tariff increases as plausible triggers for inflation rate rise in 2022.