CEM REPORT – ECONOMY | The 10th National Economic Outlook: Implications for Businesses in 2024 organized by the Chartered Institute of Bankers of Nigeria Centre for Financial Studies (CIBNCFS) was another opportunity to scrutinize critical economic opportunities and challenges facing Nigerian economy.
Economic policies of the Bola Tinubu led administration according to experts, has kept the Nigerian economy in a challenging moment but with array of opportunities if the right strings are pulled with regard to precise fiscal and monetary actions.
President and Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN), Dr Ken Opara highlighted the two major policy actions in this regard which are;
“The removal of fuel subsidy, one of the first initiatives of our 16th President, Bola Ahmed Tinubu, GCFR, marked a crucial juncture in our economic journey. While this move aimed at effective fiscal resource allocation and economic growth stimulation, it did pose immediate challenges, particularly in the surge of fuel prices and the subsequent ripple effect on the cost of goods and services.
“Further to this, the Central Bank of Nigeria (CBN) adopted a free-float foreign exchange management regime in line with the President’s planned target to carry out monetary policy reforms to restore a single exchange rate in the country. Although the decision to float the naira met with mixed reactions, it is widely believed that this step was a necessity in order to improve the country’s economy.”
The challenges presented by the policies have impacted different sectors and key economy indicators such as inflation, rising cost of production occasioned by high exchange rate.
“Foreign exchange fluctuations have depreciated the naira by 49% (World Currency Monitor, 2024) over the past year impacting import costs for businesses. Disruptions in global supply chains have further burdened manufacturers, pushing up the production costs”; Opara said
In the midst of these challenges, the Keynote Speaker Mr Muhammad Sani Abdullahi Dattijo while speaking on the outlook, expatiated factors supporting prospective growth of the economy which include expected increase in crude oil production, anticipated moderation in pump prices anchored on domestic fuel refining, higher anticipated demand from a growing middle class and others.
On the current biting inflation, the Deputy Governor, Economic Policy at Central Bank of Nigeria raises hope saying that rising inflation is for the short term.
He said; “Inflationary pressures may persist in the short-term but are expected to decline in 2024. The recently introduced inflation-targeting policy of the Bank is expected to rein-in inflation, which is projected to decline to 21.4 per cent, following the crystallisation of Government reforms, despite its persistence in 2023.
“Food inflation is expected to decrease due to improved agricultural productivity. The expected deceleration will largely reflect the base effect of Government reforms in energy and the easing of global supply chain pressures. This would boost consumer confidence and purchasing power, benefiting businesses across board.”
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Factors supporting the Outlook
In overall, Principal Consultant at BAA Consult, Biodun Adedipe highlighted some of the factors supporting the overall outlook and the various Nigerian real GDP growth projections which include 3.76% by CBN, 3.47% by BAA, 3.3% by World Bank and 3.1% by IMF.
- Large, youthful and rapidly growing population (6th largest in the world, median age at 17.2 years).
- Rapid urbanization (51.96% in 2020 and 53.96% in June 2023, up from 47.84% in 2015).
- Deepening internet penetration: at 45.57% in Aug 2023, rising from 31.48% in Dec 2018
- Teledensity: 116.6% in Dec 2022 and 115.63% in Aug 2023, a drop from 123.48% in Dec 2018 (but 91% in March 2019); Global internet users: Nigeria ranks 11th.
- Exchange rate: budget assumption N800/$; significant utterance N650 – N750/$; JP Morgan N850/$.
- Interest rate: MPR (18.75%) expected to be raised to reduce negative interest rate by closing the domestic inflationary gap (28.92%) and respond to rate differentials with $ interest (3.96% yield on 10-year treasury bond) and inflation (3.4%).
- Inflation rate: Money supply and imports have maintained relentless uptick.
- Sustained deep reforms (President Tinubu is focusing on global competitiveness and Ease of Doing Business, plugging leakages and shrinking the space for economic rent).
The event was organized in partnership with BAA Consult and was held on January 23, 2024
