Nigeria’s external balance will improve with normalization of oil revenues – Sigma


Sigma Pensions predicted that improved oil production would increase Nigeria’s external balance until 2022.

This was revealed in a recent report from Sigma Pensions titled “Nigeria 2022 Outlook: Consolidating on recovery but persisting large imbalances present headwinds”

The report also notes that the investment landscape in 2022 will be shaped by the normalization of global economic growth and a tightening of global monetary policy.

In addition, OPEC + would complete the rebalancing of the crude oil market with oil prices remaining within a range.

The report predicts that Nigeria’s growth will stabilize, but that twin deficits will persist along with wider premiums in the forex market due to the limited supply of USD and the suppression of import demand and collapse. rising fuel prices to rekindle inflationary pressures.

According to the report, “We expect the oil sector to emerge from recession in 2022 as Nigeria’s crude production rebounds from the low base of 1.6 mbpd in 2021 to a range of 1.8-1, 85 mbpd and that most OPEC + restrictions are removed by May 2022.

“Given our price and production expectations, we expect Nigeria’s external balance to improve as oil export earnings normalize to trend levels amid continued suppression of demand for oil. ‘import due to the CBN’s monetary policy. “

Economically, the report predicts that Nigeria’s economic growth will stabilize around 3.4% in 2022, reflecting improvements in telecommunications, trade, manufacturing and petroleum.

He further added that a broad budget borrowing plan and higher political risk premia are expected ahead of the 2023 general election.

For equity markets, the report believes that bearish trends dominate market sentiment as fixed income optionality becomes available to investors after a two-year hiatus and political risk premiums on risky assets. Naira increase ahead of the 2023 general election.

He noted that domestic institutional investor support for the flagship names is expected to continue to limit the decline in the market as a whole.

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