Recurring fuel shortages could push inflation to 19% – Economists

Economists at Vetiva have said recurring fuel shortages could push inflation to 19 per cent in 2022.

The economists, Ibukun Omoyeni and Angela Onotu proposed a bear case scenario of 19 per for inflation after a base estimate of 17.50 per cent.

They said, “We see considerable risks from global food shortages, sustained fuel shortages, another energy crisis, higher power tariffs, and weaker exchange rates. Amid these varying outcomes, our base estimate for inflation is 17.50 per cent y/y in 2022.”

The economist expects the nation’s economy to grow by 2.7 per cent y/y in 2022, driven by supportive base effects, volatile oil production, sustained growth in active GSM lines, and slight depreciation in the Naira. They added that the war in Ukraine was causing supply disruptions globally.

They stated, “We note that both warring countries are key commodity exporters, and supply disruptions would reverberate globally. With inflation reaching new highs, the Fed’s increasingly hawkish stance, combined with a stronger dollar, poses new challenges for emerging and frontier markets.

“The warring economies (Russia and Ukraine) are responsible for 3.6 per cent of African imports. Despite the little exposure to Ukraine and Russia, constrained supply from these economies means prices of these commodities, most of which are essential, will be elevated.”

According to the economist, the war will place immense pricing and external strain on African economies, and economies such as Ghana and South Africa with floating currencies and volatile fuel prices would be adversely affected.

Speaking on the nation’s upcoming general elections, they said, “A trip down memory lane shows that despite increased voter registrations, the voter turnout ratio has declined steadily since 2003.

“Beyond voter turnouts, a cursory glance at the economic outcomes of previous elections shows one clear fact – economic performance is tied largely to the performance of the oil sector.”

The economist added that the recent decline in the oil sector was due to crude theft. They added that the naira would slightly depreciate towards N440/$ in the Investors and Exporters Window.

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