The roils from geopolitical tensions, and their consequent passthrough to commodities prices and global inflation created an early dilemma for monetary authorities at the start of 2022. And even though it was hard to tag it as a surprise, the Russia/Ukraine war sent shockwaves to economies miles away from Eastern Europe. The crisis led to material trade routes disruptions, a surge in commodities prices that worsened the baggage from inflation, and for a while, several permutations on the likelihood of a third world war.
By accident or design, the war is yet to deteriorate into the initial worst-case scenario. After the early jitters, the rest of the world appears to have markedly shifted attention to managing its economic fall-outs and other older impasses. In particular, central monetary authorities appear to be consolidating on the "war" to contain inflation, with monetary policy tools often repeatedly unleashed. Here, in Africa, the distortion of the global world order had mixed impacts. Proactive net commodities exporters are reaping the dividends of recent rallies, while net importers of commodities count their trade balance losses.
Expectedly, global markets for risky investments have been mostly below the water. Yet, Nigerian markets stood relatively firm amidst this almost ubiquitous market rout. Its major equity index remains the second -best performing in the world, while its fixed income market staged a decent rally in Q1'22. This report assesses the character and sustainability of this relative resilience of naira assets. In particular, it gauges the potential impact of rising political uncertainties—especially as campaigns for the 2023 elections intensify—and dynamic macros on investment opportunities across the oil-rich giant with mostly unique policy management systems.
