6 Months to the End of 2024: Review of Nigeria Economic Outlook 2024.
Like I earlier forecasted (https://www.linkedin.com/posts/babajide-babatunde-mercy_nigeria-economic-outlook-2024-12-months-activity-7149999414886010881-ewgQ?utm_source=share&utm_medium=member_desktop), the Nigerian economy's outlook for 2024 is mixed, with potential for modest growth alongside significant challenges just as we have experienced in 2024 H1.
Here's a breakdown of key factors
GDP:
Growth forecasts: Nigeria’s GDP Grows by 2.98% in Q1 2024. However, IMF projects 3% decline while AfDB projects 3.3% increase in 2024.
Achieving the 3% increase in 2024 as forecasted by the AfDB may be threatened by the ongoing high inflation rate; insecurity; tight financial conditions limiting credit access; fiscal constraints restricting government spending. The exit of multinational companies from Nigeria in 2024 H1 will further impact the growth rate negatively.
While foreign investors are being wooed to invest in the economy, tax reforms introduced by the FG and the commencement of Dangote refinery is expected to contribute to the economy positively.
Exchange Rates:
The naira has emerged as the worst-performing currency in the world in the first half of 2024. Tracking data from FMDQ, Bloomberg said that the naira weakened for a ninth straight day to N1,510 per dollar by the close of H1 2024.
Given the expected multiplier effect of the unification of FX and decline in FX inflow, it is projected that the FX may still depreciate further at a reducing rate.
Oil Production:
While the oil price at the global market has been fairly stable, Nigeria's oil production in Q1 2024 averaged 1.57 million barrels per day, which is higher than the daily average production of 1.51 million barrels per day recorded in the same quarter of 2023. OPEC may raise production quotas, potentially boosting Nigerian output. Looking forward to further increase.
Domestic challenges remain oil theft and pipeline vandalism impacting production and the need for investment in exploration and infrastructure upgrades.
FX Reserves:
According to the latest data published by the CBN, the reserves now stand at $33.58 billion as of June 19, 2024. This marks a significant financial milestone that coincides with the longest period of stable exchange rate seen in over a year.
Dependence on oil revenue remains a vulnerability.
Monetary Policy (MPR):
Despite that Nigeria's inflation driver is more of cost-push than demand-pull, the Apex bank has been increasing the MPR from 18.75% as at the end of Q4 2023 to 26.25% as of 21 May 2024. There is a possible upward adjustment at a diminishing rate to curb inflation if it remains stubbornly high and to also attract foreign investment.
Market Capitalization:
Despite the exit of numbers of listed companies, in Q1 2024, the NGX posted an increase of 39.84%, hitting an All-Share Index of 104,562.06 points. The market capitalization of the NGX also appreciated by 44.5% to close the quarter at N59.13 trillion, representing an N18.21 trillion increase from N40.92 trillion at the start of 2024.
Based on this trend, I remain bullish about for H2 2024.
Inflation:
Nigeria's headline inflation increased for the 17th consecutive time to 33.95% in May 2024, up from 33.69% in April while food inflation sits at 40.66%. Food insecurity and FX devaluation remains the key contributors to the overall inflation rate in Nigeria. Except these are resolved, there may be further increase in inflation rate.
It's important to note that these are just forecasts, and the actual economic performance in H2 2024 could be different. The situation remains fluid and will depend on various domestic and global factors.
DISCLAIMER:
This article is intended solely for educational purposes and should not be quoted out of context. The opinions expressed herein are strictly those of BBM (the author) and do not represent the views or positions of the author’s employer or any other affiliated institutions. The content provided is based on the author's personal analysis and research and should not be construed as professional advice. Readers are encouraged to seek professional guidance for specific concerns. The author disclaims any liability for any actions taken based on the information presented in this article.
