Nigeria’s real GDP is expected to grow by 3 to 4% in 2022 driven largely by the services, manufacturing and oil and gas sector. This is according to a report by Agusto and Co in its recent report on the Economic Outlook for 2022.
The growth is expected to be fueled by improved performance as businesses and households in Nigeria fare slightly better than they did in 2021 and as the world recovers from the Covid-19 pandemic.
However, the report added that returns delivered by key businesses will still be below the expected return (cost of equity) estimated at about 27% for Nigeria while real wages will continue to drop and unemployment will keep rising.
Highlight of the report
- We project real GDP growth of 3-4% in 2022 driven largely by the services, manufacturing deliver ROE that is above average inflation of about 15% in 2022. Financial services businesses will struggle to meet this hurdle rate largely due to negative regulations and a higher effective tax rate.
- In 2022, businesses will need to grow their nominal sales by about 15% to keep pace with inflation. This will be difficult for most as the real wages of consumers are unlikely to keep pace with inflation.
- After-tax return on equity (ROE) across most industries will remain weak and below the cost of equity estimate, at around 27% for 2022. However, key businesses in the real estate sector should deliver ROE that is above average inflation of about 15% in 2022 as financial services businesses will struggle to meet this hurdle rate largely due to negative regulations and a higher effective tax rate.
- Population growth of 2.5% will eat the bulk of the real GDP growth of 3-4% projected, this means that real GDP per person will still be below the N383,000 for 2015.
- Real wages of employees who work for the key businesses in the real sector will continue to fall.
- Unemployment will continue to rise as school leavers join an economy that is weak at creating jobs.
What you should know
Nairametrics had earlier reported that Nigeria’s Gross Domestic Product (GDP) grew by 4.03% (year-on-year) in real terms in the third quarter of 2021, showing a sustained growth over the last four quarters since the recession witnessed in 2020.
According to the report, Nigeria’s real GDP grew by 4.03% in Q3 2021, representing a slower growth compared to 5.01% recorded in the previous quarter. On a quarter-on-quarter basis, real GDP grew by 11.07% in Q3 2021 compared to Q2 2021, reflecting a higher economic activity than the preceding quarter.
