CEM ANALYSYS, ECONOMY | Nigeria, the largest economy in Africa, is facing many social and economic challenges, such as insecurity, inflation, poverty, and low productivity. However, the country also has a unique opportunity to return to a sustainable and inclusive growth path especially in 2024.
As Nigerians bid farewell to 2023, their gaze shift towards 2024 with a nuanced blend of hope and trepidation. The economic horizon shimmers with potential, yet potentially tempered by inherent challenges. Navigating this intricate landscape requires a keen understanding of emerging trends, informed investment strategies, and a prudent preparedness for potential roadblocks.
The recent reforms undertaken by the new administration of President Bola Ahmed Tinubu including the removal of the petrol subsidy and the unification and liberalization of the exchange rate, are expected to reduce fiscal pressures, improve oil revenues, and correct the critical macroeconomic distortions that held back growth in the past. The World Bank has commended these reforms as “critical steps in the right direction towards improving Nigeria’s economic outlook”.
Possible economic projections and challenges for the year 2024
According to the World Bank, the economy is expected to grow at an average of 3.4 per cent between 2023 and 2025, benefitting from the recovery in the agriculture and services sectors, and increased scope for government development spending. However, the growth rates are still below the population growth rate of 3.6 per cent, which means that the per capita income will remain stagnant.
The International Monetary Fund (IMF) and World Bank forecast moderate real GDP growth of 3.3 per cent and 3.6 per cent respectively for 2024, marking an anticipated uptick from 2023’s figures. This improvement hinges on factors like the Dangote refinery reaching full operational capacity, boosting petroleum product exports and reducing import dependence.
Though currently elevated at around 21 per cent (November 2023), analysts predict a gradual decline in inflation throughout 2024, potentially settling within the Central Bank of Nigeria’s (CBN) target range of 6-9 per cent by year-end. Its present bite erodes purchasing power and complicates investment decisions, this could alleviate pressure on purchasing power and encourage consumer spending.
The high inflation and low growth have adverse effects on the living standards of Nigerians, especially the poor and vulnerable. The World Bank estimates that the number of people living below the poverty line has increased from 95 million in 2021 to 104 million in 2023, and is likely to rise further in 2024.
The Naira’s performance remains shrouded in uncertainty. Optimistic projections anticipate stabilization, while others foresee continued volatility due to dependence on oil prices and foreign inflows.
Solutions
To address these challenges, the World Bank recommends that the government should continue with the reform momentum and ensure coordinated fiscal and monetary policy actions in the short to medium term. This includes ensuring that the improved oil revenues following the subsidy removal accrue to the Federation, and are used to finance development spending on infrastructure, human capital, and social protection. The government should also pursue further reforms to reduce insecurity, strengthen public services, and improve the business environment and openness to trade, which could boost investments and productivity.
Financial possibilities, economic outlook, and investment options for Nigerians in this complex scenario.
Despite the challenges, Nigeria also has many opportunities for investment and economic diversification. Some of the most profitable investment opportunities in Nigeria for 2024 are:
– Agriculture: With fertile land and a vast consumer base, Nigeria’s agricultural sector beckons. Investments in agribusiness, both directly and through innovative fintech platforms, could yield significant returns.
Nigeria has a large and growing population that needs food, and a vast arable land that can be cultivated. Agriculture is one of the key sectors that can drive economic growth, create employment, and reduce poverty. The government has created various incentives and programs to support agriculture, such as the Bank of Agriculture, the Universal Basic Education Commission, and the Basic Healthcare Provision Fund. Some of the sub-sectors that have high investment potential are crop production, livestock, fisheries, agro-processing, and agro-allied industries.
– Technology: Nigeria has a vibrant and innovative tech ecosystem, with many start-ups, hubs, and incubators that are developing solutions for various sectors, such as fintech, e-commerce, health, education, and entertainment. The tech sector has attracted significant foreign and local investments, as well as partnerships with global players, such as Google, Facebook, and Microsoft. Some of the factors that make the tech sector attractive for investment are the large and young population, the increasing internet penetration, the mobile money adoption, and the supportive regulatory environment. Invest in businesses with strong fundamentals and growth potential.
– Real Estate: Nigeria has a huge demand for housing, especially in urban areas, where the population is growing rapidly and the supply is inadequate. The real estate sector offers opportunities for investment in residential, commercial, industrial, and hospitality properties, as well as in infrastructure development, such as roads, bridges, and power. The government has also introduced policies and initiatives to stimulate the sector, such as the National Housing Fund, the Family Homes Fund, and the Mortgage Refinancing Company.
While urban real estate might be cooling down, affordable housing projects and commercial spaces in emerging towns could provide stable returns. Land acquisition for future development holds long-term potential. Conduct thorough research on affordability trends before investing.
– Diversification through Mutual Funds: Spreading risk through mutual funds, which pool resources and invest in diverse assets, offers a safer and more accessible entry point for those with smaller capital.
Recall a CEM report where investment Lawyer, Sunny Kanabe, stated that the Nigerian Stock Exchange Market (NGX) has been enjoying a steady run since the year (2023), stressing that there is no better time to invest in the market than now. He added that stock investment is a viable means of diversifying investment portfolios across various sectors of the economy and protecting such investments from unpredictable inflation.
A Time for Resilience and Prudent Strategies
2024 paints a complex economic picture for Nigerians, one brimming with both possibilities and challenges. Navigating the Nigerian economy in 2024 requires a prudent approach. While cautious optimism is warranted due to projected growth and potential inflation decline, significant challenges remain. By considering these obstacles, exploring diverse investment options with due diligence, and adapting to an evolving environment, Nigerians can strive for financial security and contribute to the nation’s economic progress. Remember, careful analysis, financial literacy, and seeking professional guidance when needed are key to navigating this complex landscape and seizing potential opportunities.
Additionally, the economic outlook for 2024 depends largely on the implementation and continuation of the reforms that have been initiated by the government, as well as on the resolution of the security and social issues that affect the country.
