Against the backdrop of weak economic growth, record low foreign exchange inflows and heightened pre-election country risk in 2022, Chief Executives of major banks in Nigeria have indicated that a turnaround in major macroeconomic indicators and market rebounds would depend on a positive outcome of the 2023 general elections.

Areas of concerns, according to them, include investment attractiveness, foreign exchange inflows, financial sector robustness and general economic wellbeing of the citizens.

In their various notes to Vanguard, the bank CEO’s opined that a credible electoral processes and positive outcome would drive investors’ confidence leading to record high foreign exchange and foreign investment inflows, continued growth in the financial sector driven by increased competition among players through improved innovation to enhance service delivery and customer experience.

The banks’ CEOs who spoke exclusively to Vanguard include Oliver Alawuba, Group Managing Director/CEO, United Bank for Africa Plc, UBA; Abubakar Suleiman, Managing Director of Sterling Bank Plc and Jeremy Awori, Managing Director of Ecobank Nigeria Limited.

Stressing that the UBA Group, is concerned about the socio-economic growth of Nigeria and the African continent at large, Alawuba, UBA’s CEO said: “The Nigerian economy/Banking industry would witness some growth and new opportunities in 2023 and beyond, especially if the outcome of the forthcoming general elections is perceived to be free, fair and credible by stakeholders in all its ramifications.”

Suleiman, Sterling Bank’s CEO, highlighted 17 major developments in his projections for the local and global economy in 2023, including: Improved FX flows; lower Inflation; record high Foreign Direct Investment, FDI into Nigeria, Increased pressure on international trade and reduction in local logistic bottlenecks due to new port facilities as well as increased contribution of telecoms sector to GDP driven by 5G technology.

Ecobank’s CEO, Jeremy Awori, in his outlook, said the economy will experience continued innovation in digital payment in 2023 which in turn will lead to improved financial inclusion and increased growth in volumes of digital payments.

Their perspectives came against the backdrop of the World Bank’s forecast on Nigeria’s economy in 2023 which lowered growth to 3.2 per cent from 3.3 per cent, citing slowdown in global growth, the war in Ukraine and including declining demand from China for commodities produced in Africa.

With much optimism, Abubakar, the Managing Director of Sterling Bank, sees some recoveries across macro-economic and financial indicators in 2023 if the elections turn out well.

What goes up…

He stated: “Inflation will moderate as the base effect kicks in, made easier by an anticipated improvement in foreign currency flows after the election, as well as improved harvest following the setbacks that were experienced in 2022. “Foreign Exchange flows will benefit from post-election relief and increased investment interest from the US and Germany, with China poised to respond to the western charm offensive in Africa.

“Moderate inflation numbers in Q3 will end the interest rates tightening cycle although lending rates are unlikely to moderate before the end of the year as investors contend with more than N20 trillion worth of new sovereign debt instruments.

“We expect central banks across most regions to start calming markets in late 2023 to avert a global recession and spur growth as inflations come within national targets.

“Food inflation risk will remain a principal concern for both monetary and fiscal authorities in Nigeria, as farmers may be reluctant to return to recently flooded farmlands”.

Abubakar said insecurity may also deter farm expansion in the historical food belt, but he also noted that due to recent exchange rate-fed price adjustments, Nigerians will continue to substitute importation of rice and wheat with local alternatives.

On stock market outlook, Abubakar said, “Due to investors’ confusion over mixed signals, Q1 stock market performance will be relatively flat. Major indices are expected to expand by double digits if market and tax reforms are implemented by Q3 as expected.

“Nigeria will receive record investment flows as interest in oil and gas assets crystallises alongside investments in the surviving technology companies and cloud infrastructure.

“FDI in 2023 will top $4b -the highest since 2014 with government sponsored entities, projects and infrastructure dominating private sector deals”.

Tick Tock: Time and trade march on

On the trade sector, he stated: “More pressure will be put on international trade as a result of the protracted conflict in Ukraine and the struggle to rein in China’s technological advancement, but energy prices will level off due to reduced demand as economies throughout the world slow down. Despite renewed expenditures in energy infrastructure, prices will remain high by historical measures.

“Local bottlenecks will improve as the new port facilities are brought online, leading to the decongestion of Tin Can Island and Apapa ports. Domestic logistics will however remain a nightmare due to a lag in road investment to support Lekki ports. In addition, the commencement of production in the Dangote refinery will introduce new challenges for traffic management on the axis”.

Tech bounds, leaps and pushes

Abubakar also gave insight to what may happen in the technology sector, saying, “Investments in 5G and cloud infrastructure will sustain the contribution of telecom to GDP as revenue from data increases.

“However, advancement will remain heavily concentrated in Lagos and Abuja, further accelerating the emerging digital divide. “The sector may face policies designed to push investment beyond the big cities to even development”.

Ways, means and ends

On monetary and fiscal policy conditions, the Sterling Bank boss stated: “The collective impact of the Naira redesign and new cash-light regulations will improve tax collection from Q3, but the mounting cost of borrowing (arising from higher interest rates and the securitisation of ways and means) will widen the deficit in Q1, offsetting the benefits from higher revenue. “The government will commence gradual withdrawal of petrol subsidy in favour of investment in social programs and rural infrastructure”.

Speaking on the energy sector, Abubakar stated: “The ongoing pump price adjustment will continue till the end of the administration in May 2023 -setting the foundation for the complete removal by the next administration before the end of the year, just as local refining infrastructure are activated”.

To japa or not to japa

He also gave insight into labour issues that will show up in the year saying, “2023 will witness a fall in the number of workers emigrating to the West as schools tighten admissions requirements and visa conditions, while muted labour demand will temporarily disrupt global labour mobility.

“By the fourth quarter of 2023, the number of Nigerians seeking opportunities in western cities will fall to pre-pandemic levels, followed by the first wave of returnees from the 2020 and 2021 cohorts.

“Youth unemployment will remain the number one threat to political stability and economic growth. Hopeful signs will emerge as more companies start to consider Nigeria as a hub for remote work in fields ranging from call centres to software engineering. Unemployment will edge downward in Q4 after peaking in Q3 post-election”.

Start. Stop, start-up again

Abubakar also hinted on a major shift in Nigeria’s start-up segment stating, “The Nigerian start-up ecosystem will witness the separation of the boys from the men as vanity tech run out of runways, leading to acquisitions and liquidations. Local capital will continue to drive low cap investments in early-stage companies until the end of Q2 but significant foreign investment will resume in Q3 as real winners emerge”.

On fintech developments, Abubakar said, “With major transition in last-mile banking from POS to digital payments, some FinTech revenue models will collapse, leading to pivots from payments to products and enhanced sector collaboration and improved lending to SMEs using insight from FinTechs. 2023 will be the year of EdTech as the full impact of the National Universities commission policy reforms becomes obvious”.

Not every time oil

He expressed optimism over Nigeria’s export sector, saying, “Nigeria’s non-oil export will witness double-digit growth in real terms; this will be driven by the increased formalisation of solid mineral exports and export crops processing -spurred by the Central Bank of Nigeria’s export facilitation initiatives, the benefit of export terminals, port infrastructure and currency adjustment”.

Crypto, fiat and flat

On digital currency positions in 2023, Abubakar stated: “In 2023, more countries will put in place regulations to manage the risk associated with cryptocurrencies as fringe tokens are found to be worthless.

“The more structured and better-governed exchanges and tokens will continue to trade relatively sideways as the volatilities seen in the past are unlikely to be repeated in 2023”.

More power for the people

In the area of power supply, said “Nigeria will achieve a sustained grid power output in excess of 5GW, but the grid reliability will remain a challenge. Significant reforms in the sector are unlikely to commence until 2024, leading to the restructuring and recapitalisation of more power distribution companies”.

Economy will experience some growth, new opportunities — UBA CEO

Giving background to his perspectives, Alawuba stated: “During the immediate past year, the Nigerian economy was materially characterized by insecurity/theft in the oil sector thereby imposing significant pressure on Government revenues, coupled with rising inflation and monetary tightening posture of the apex bank as is the case with Central Banks globally.

Economic growth review

“From the year 2015 to 2021, the economic growth rate in Nigeria averaged around 1.1%, far below half of the population growth rate. The unemployment rate as at year end 2020 was at 33.3%, about 22.9% higher than what it was in the second quarter of 2020. This has added to the crucial challenge of insecurity and criminality in recent years in Nigeria – FDC

“However, given the concerted efforts of the government in ensuring adequate security in the Niger Delta and across the country, it has been projected that Nigeria’s oil production is to increase to 1.6mbpd by Q1’23, up 34.45% from the 1.19mbpd averaged in November 2022. It is believed that this will translate to higher export revenue and bolster government income.

Election & economy

“The 2023 general election is crucial for Nigerians and the Nigerian economy as it relates to some aspects, like the public finance management, civil service operations, improvements on security, power sector reforms and economic development to address the issue of unemployment and poverty reduction.

“The enthusiasm exhibited by Nigerians to collect their PVCs to enable them to participate in the general elections is overwhelming and encouraging. The positive outcome of the elections is expected to comfort private investors which would improve the gloomy outlook for public private partnership (PPP) and the drag on the manufacturing sector.

Forex inflow

“In addition, worthy of note is the CBN’s aggressive efforts in ensuring the stability of the exchange rate, specifically through the non-oil sector – RT200 Non-Oil Export Repatriation Programme introduced in February 2022.

“Accordingly, Nigeria’s non-oil exporters have repatriated a total of $4.99 billion, within 10 months (as at November) after the introduction of the initiative – CBN. This is 56.43 percent higher than the $3.190 billion repatriated in 2021, prior to the launch of the policy.

“Another sector that needs to be fully exploited in the country is Mining. Despite the abundance of mineral resources and gemstones in Nigeria, the mining of minerals in Nigeria accounts for only 0.3% of its Gross Domestic Product (GDP) due to the influence of its vast oil resource, compared to the sector’s contributions in other African countries e.g Congo DR (18%), Zambia (9.9%) and so on.

“The competition for market share between Deposit Money Banks (DMBs) and Other Financial Institutions, including FinTechs and Telcos in the drive for financial services/financial inclusion cannot be underestimated. Technology and Innovation will continue to redefine experience to suit the needs of the next generation of bank customers.

2023 outlook

“UBA is a Pan African Bank with a major goal of providing a robust financial services platform for Africans and African businesses globally. We are concerned about the socio-economic growth of Nigeria and the African continent, at large. With a history span over seven decades, UBA Group has presence in 24 countries across 4 continents – Africa, America, Europe and Asia.

“In our opinion, the Nigerian economy/Banking industry would witness some growth and new opportunities in 2023 and beyond, especially if the outcome of the forthcoming general elections is perceived to be free, fair and credible by stakeholders in all its ramifications.“ (Vanguard)

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