Investors optimistic of future GDP growth amidst rate hike – Rewane

As the Nigerian economy rises 3.11 per cent in full year ended first quarter of 2022, the hike in interest rate will likely excite investors the more in a tamed inflation era, Bismarck Rewane, Chief Operating Officer (COO) of the Financial Derivatives Company (FDC) Limited has opined.

His argument is that, with the Central Bank of Nigeria (CBN) hiking the policy rate by 150 basis points to 13 per cent per annum in an effort to tame inflation which currently stand at 16.82 per cent, investors are likely to become more optimistic about future growth in a tamed inflation era.

He noted that the first quarter is typically a slow season for growth because it coincides with the end of the harvest and the commencement of the planting season. The peculiarity of 2022, is that it is the first year of what can be described as a post covid economy.

In the first quarter of 2021, the economy was still limping from covid restrictions and aftermath of the end-SARS protests.

“Therefore, when compared with the corresponding period of the prior year, the numbers look impressive but one can attribute the growth cosmetics to base year effects”, said Rewane in a recent FDC publication made available yesterday.

He however said that, after discounting for the 2021 economic anemia, certain trends are noteworthy from the numbers. These include the fact that, 25 sectors expanded, 11 slowed and 10 contracted. The intriguing thing is that the expanding sectors are job elastic.

“The economic shock that followed Russia’s invasion of Ukraine and high rate of insecurity took a toll on some sectors. Road transport contracted by -24.63 per cent, down from a positive growth rate of 30.39 per cent in te fourth quarter of 2021 while air transport slowed to 50.68 per cent, which could be attributable to the surge in aviation fuel price.

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