Seven trends that will shape Nigeria’ economy in 2024 – PwC

PwC Nigeria, a professional services firm, has highlighted seven key trends that will shape Nigeria’s economic trajectory in 2024.

In its latest Nigeria Economic Outlook report, the firm said investors will be cautiously optimistic, consumers may likely adjust better to the evolving policy and macro realities and the country may witness improved sectoral development riding on reforms.

Others are evolving monetary policy stances to find the right framework and instruments to achieve price stability, undulating pathways to unlocking productivity in the economy, persisting vulnerability to external pressures with the potential of ‘shocks’, and executing fiscal reforms by balancing ambition with budgetary implementation.

“We project a marginal decline in inflation and a 3.1 percent rise in Gross Domestic Product (GDP). Achieving sustainable growth in 2024 requires balancing ambitious fiscal reforms with effective budget implementation,” the report said.

It highlighted the importance of aligning fiscal and monetary policy to stabilise prices and reach target goals.

According to the report, foreign portfolio investment flows to the capital market may remain cautious due to residual challenges.

“Investors’ outlook may be dampened by downgrades from FTSE Russell and MSCI, specifically due to delays in capital repatriation. Despite this, Moody’s, Fitch, and S&P maintained a speculative credit rating due to drawbacks on reforms and several fiscal challenges that persist,” it said.

It added that Foreign Domestic Investment flows are expected to improve in 2024 driven by notable expansion in the growing ICT and manufacturing sectors.

Authors of the report said the proposed fiscal reforms have the potential to boost non-oil revenue and shape the economy, but success hinges on effective budgeting and execution.

“Nigeria’s ambitious revenue targets for 2024 depend heavily on oil prices and reform implementation. Historically, actual revenue realised has averaged less than 70 percent of the total budget.

“Achieving budgeted oil revenue in 2024 will depend on OPEC oil production quota, international oil prices, improved security in the oil-producing regions, and geopolitical factors,” they added.

The report noted that the allocated infrastructure spending budget for 2024 is N1.32 trillion, which falls short of both the World Bank’s suggested 70 percent infrastructure-to-GDP benchmark (currently at 30 percent) and the yearly $150 billion requirement specified in the National Integrated Infrastructure Master Plan for 2021- 2025.

“Security spending in the past nine years amounted to N14.8 trillion. Despite increased spending, insecurity remains a challenge and jeopardises national stability, negatively affects economic activities and undermines investor confidence.”

It said if the Russia-Ukraine war intensifies, it could lead to increased global energy and commodity supply risks and that Nigeria may experience increased inflation and food security challenges due to grain import disruptions and high petroleum product costs.

“The outcome of elections in several countries globally, especially USA, UK, and Taiwan may shape the dynamics of trade and capital flows around the world in 2024.”

PwC added that consumer spending may be pressured in 2024 due to rising prices of goods and services (increasing food and transportation costs), coupled with lower disposable income.

“However, private consumption is expected to be marginally better than in 2023. Poverty levels are projected to increase to 38.8 percent in 2024.

“Despite the low unemployment rate in the country, low consumer spending and purchasing power remain an issue, especially in the absence of a commensurate increase in the minimum wage to mitigate the inflationary growth in the economy.”

The firm also revealed that Nigeria’s GDP may grow marginally by 3.1 percent in 2024 on the back of sustained policy reforms and that the growth projection is driven by ongoing reforms, recovering oil production, and a proactive policy environment.

“Possible downside risks to this projection include sustained rise in fiscal debt, elevated interest rates, high inflationary levels, foreign exchange liquidity pressures, high exposure to shocks in the global value chain, poor non-oil revenues, and sector development.

“In terms of sectoral growth, the main drivers of GDP growth in the last 12 months have been the financial services, information and communication, and utilities sectors. The firm expects these sectors to continue to drive growth in the short term,’ it added.