EIU highlights five key risks to watch in Nigeria including reform unleashed crisis

The Economist Intelligence Unit, EIU has highlighted five key risks for Nigeria that could severely impact the attainment of important goals of peace, economic stabilization and development in the months ahead.

In its March 2024 report, the EIU listed the risks to include high possibility of Nigeria moving too fast on market reform and thereby unleashing mass unrest; the highly probable likelihood of social unrest that forces the government to make concessions on its reform agenda; strikes that bring the economy to a halt.

Others risk of the Naira crossing N2000/$ by end of the year as well as the moderate risk of Boko Haram activity spreading from the north-east to central Nigeria. It rated the risk of the Naira passing N2,000/$ by year end as highly probable and with high impact.

The analysts at EIU revised upward their economic growth forecast for Nigeria from 2.2 per cent to 2.5 per cent on the premise of higher than previously expected crude oil output as well as likely impact of Dangote refinery.

The EIU sees a faster growth of 3.5% next year while it forecasts consumer price inflation to come down to 20 per cent in 2025 and 17.4% the following year before falling to 11.7% in 2028.

For the Naira, the EIU sees a further devaluation in the years ahead.

According to the EIU report, “the higher growth forecast has come despite sharper than expected monetary tightening in February. We now expect the Central Bank of Nigeria’s policy rate to peak at 23.7%. This is 200 basis points higher than our previous forecast.”

The EIU speaks of the economy of Nigeria which is the joint-largest economy in Sub-Saharan Africa as that characterized by chronic insecurity is chronic in many areas, with the security forces too overstretched to counter multiple crises effectively. “High inflation, low economic growth and unpopular market reforms present substantial political stability risks,” with Labour unions likely to be active, with a high risk of industrial action that affects the economy.

It said “economic growth will slow in 2024 as a new bout of inflationary pressure, a large currency devaluation and monetary tightening lead to a contraction in domestic demand. Growth will be higher in 2025-28 as monetary conditions ease and will be boosted by investment in the recently deregulated power sector.”

The EIU concluded that although “Nigeria is a signatory to the African Continental Free-Trade Area agreement the government will take a protectionist approach to regional trade and will do little to encourage regional trade, beyond meeting its obligations on tariff cuts.”