Gross External Reserves to Decline Towards $39bn, Says Rewane

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Ugo Aliogo and Deborah Anuoluwapo
The Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, has stated that gross external reserves would to decline towards $39billion, as the Central Bank of Nigeria (CBN) increases forex supply and foreign portfolio investors exit due to political uncertainties.

Rewane, who disclosed this at a virtual meeting organized by First Bank Nigeria focusing on Nigeria Economic Outlook for 2022, advised the CBN to step up efforts towards exchange rate convergence.

He predicted that there would be another currency adjustment in 2022, which would bring the official and parallel market rates closer, “political jitters would heighten forex demand pressures in Q4.”

He hinted that the first quarter (Q1) is typically going to be a slow quarter, adding that there would the proposed Premium Motor Spirit (PMS) subsidy removal in February to further erode purchasing power due to higher retail petrol prices.

Rewane hinted that the planting season would result in reduced aggregate output, adding that there would be increased infrastructure spend to boost productivity.

He predicted that Gross Domestic Product (GDP) will grow by 4.5 per cent in 2022 judging with increased infrastructure spending (rail, roads) to boost growth, food production increases as insecurity subsides and economic drivers.

Speaking on inflationary trend, Rewane revealed that forex restrictions, higher energy costs and M2 growth would keep inflation high in Q1’22, while impact would be cushioned by increased forex supply and stronger naira in parallel market, “increased money supply in 2022 due to election spending.”

According to him, “The elimination of subsidies and the lowering of exchange rate will free up funds for all tiers of government. Fiscal deficits will decline and supplementary budgets are likely. Lower deficit financing requirements will put downward pressure on T/Bill rates. Inflationary pressures will intensify for 2-3months before abating if it coincides with the increase in forex supply.”

Earlier in his remarks, the Chief Executive Officer, First Bank Nigeria, Dr. Adeshola Adeduntan, said in 2021 global outputs rebounded and recovery was strong following improved vaccination efforts, as well as support from monetary and fiscal authorities.

He also noted that the fourth wave of COVID-19 omicron variant created some level of caution, impacting the activities of the fourth quarter of 2021 and leading to the push for booster jabs and reinstatement of COVID-19 protocols.

According to him, “As a bank, we have a legacy of supporting the growth of businesses as the engine for economic growth and development in Nigeria and across Sub-Sahara Africa. In line with our renewed vision ‘to be Africa’s bank of first choice,’ FirstBank will take the lead in driving the development of the different sectors and industries within the economies where we operate to support overall economic growth and sustainability.

“As a bank that is woven into the fabric of society, this webinar is further reinforcing our support and collaboration with stakeholders as we demonstrate our commitment and willingness to be the partner of first choice to our customers, playing a dominant financial role in unlocking the opportunities that enable businesses grow and thrive in 2022 and beyond.”