Coronation Merchant Bank Projects 2.8% GDP Growth for 2023

Kayode Tokede 

Experts at Coronation Merchant Bank have projected 2.8 per cent growth in Gross Domestic Product for 2023, attributing it to slow policy implementations and capital expenses due to laser focus on the general elections and transition between administration in the first half of the year. 

The Chief Economist and Head, Economic Research/Intelligence, Coronation Merchant Bank, Chinwe Egwim in a presentation stated that the GDP growth is projected to be driven mainly by the non-oil sector. 

According to her, “The services, agriculture and manufacturing sectors are likely to remain key growth drivers, supported by financial interventions by the CBN. Furthermore, the effective implementation of the 2022 Finance Act and the Strategic Revenue Growth Initiatives should contribute to the growth drive through increased non-oil revenues. 

“We also considered stable oil prices above USD80/barrel. However, we expect domestic crude oil production to remain below pre-COVID19 levels, due to existing challenges within the sector. We have also taken into consideration, relatively weak consumption patterns on the back of high inflation and its impact on service-oriented sectors, the impact of foreign exchange depreciation and increased borrowing costs on business activities.”

She noted that there would Be increased foreign exchange demand due to the need for safe- haven currency (USD) on the back of security concerns. We expect weak portfolio investment inflow on the back of negative real returns (yields vs inflation) and the political risks surrounding the 2023 general elections. We considered the absence of Nigeria from the ICM in the near term, which does not bode well for external reserves. 

“Accordingly, we expect that the existing demand patterns in the parallel market will continue. In our base case scenario, we see the foreign exchange rate at the NAFEX/I&E window at N505/ USD by end-2023. We considered: stable growth in non-oil exports boosted by the RT 200 foreign exchange program, continuous injections by the CBN (avg. seven per cent of total inflows on a m/m basis), halt to fuel subsidy payments by end-H1 2023.

She stated that analysts at Coronation Merchant Bank expected inflation to moderate in 2023, partly attributed to positive base effects and the Monetary Policy Committee’s (MPC) current stance on the policy rate. 

She noted that the persistent supply shocks on the back of the on-going Russia-Ukraine crisis as well as structural issues impacting the cost of doing business such as insecurity and other logistical challenges would likely keep inflation elevated.

“Other factors include, base effects, depreciation of the naira in the parallel market and an uptick in the price of PMS, due to the potential subsidy removal which would impact the cost of transport and possible demand-pull inflation triggered by increased fiscal stimulus.

“In our base case scenario, we see inflation at 18.3per cent y/y for end-2023,” she added. Speaking at the leading financial institution’s Economic Review and Outlook themed: “baton handoff economic headwinds and risk resilience in Lagos recently,” she noted 

Also speaking at the event, the MD/CEO, Coronation Merchant Bank, Mr. Banjo Adegbohungbe in his opening speech said imminent transition is the overall theme of 2023 as Nigeria is currently having transitions in so many spheres happening at once.

According to him, “And not just that this transition is happening at the domestic environment, we also have the domestic impact of a lot of events that are occurring across the globe at the same time. 

“For example, the recent downgrades of Nigeria’s risk ratings highlight various concerns around critical challenges that are filled the spotlight on our direction post transition in 2023.

“While there are significant headwinds in 2023, we believe that the potential also exists to tap into new opportunities.

“At the end of the day, the focus is simple and that is to enable you navigate the headwinds and achieve your respective strategic objectives by identifying those new opportunities.”