14 Feb 2022: Although 2021 saw a good third quarter, which strengthened the country’s gross domestic product (GDP), 2022 might not be filled with rainbows. According to analysts at Financial Derivatives Company Limited (FDC) the exchange rate pass-through effect, high liquidity, higher energy cost, insecurity in parts of the country, the postponement of fuel subsidy removal, among a myriad of other reasons is most likely to cause inflation in Q1 of 2022 and thereby damage the economic activity.

They further added that excess liquidity could cause further depreciation in Naira in the foreign exchange market in the near future.

The firm's analysts have projected the inflation rate to rise to 15.86 per cent in January and maintain the momentum in February, owing to companies across the spectrum having to raise prices of their products due to prolonged disruption in global supply chains.

Woes don’t just end there, FDC even expects a significant depletion in the external reserves from an average of $39 billion recorded as of February 3 to just $3 billion by the end of the year.

“The emergence of the Omicron virus and travel restrictions imposed on Nigeria would negatively impact foreign inflows and external reserves accretion, which would limit the ability of the Central Bank of Nigeria to intervene at the foreign exchange market,” The Punch reported.

It added that “forex scarcity “will exacerbate demand pressures at the foreign exchange market and filter into higher import costs, stoking inflation”.

Quite recently, IMF release a report predicting Nigeria’s debt service-to-revenue ratio to swell from 76 per cent in 2021 to 92 per cent in 2022 , which would not only push the country into massive debts but also deepen the poverty rate and worsen the infrastructural deficit.

Nevertheless, economists remain hopeful about 2022 saying that the demand for crude oil will rise again as Covid-19 fades further