• Tuesday, May 21, 2024
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Inflation, exchange rate pressures to decline in 2024— CBN

Again, Customs slashes FX duty rate to N1,238/$

… says N18.8bn total trade balance in Q3 of 2023

The Central Bank of Nigeria (CBN) has projected that the rising inflation and exchange rate pressures will significantly decline in 2024.

Olayemi Cardoso, governor of the apex bank said this during his presentation to the National Assembly joint committee on banking, insurance and other financial institutions on Thursday.

Cardoso also expressed confidence in the positive outlook for the domestic economy, which he said is expected to remain on a positive trajectory for the rest of the year and till 2024.

He told the lawmakers that inflation pressures may persist in the short term but are expected to decline in 2024, while exchange rate pressures are also expected to reduce significantly with the smooth functioning of the foreign exchange market.

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The inflation rate in Nigeria accelerated to 27. 22 percent from 26.72 percent in September, with food and non-alcoholic beverages as the main drivers. But Cardoso said month-on-month inflation, however, declined marginally from 2.1 percent in September to 1.72 in October indicating that the rising inflation trajectory will reverse in the next few months.

He further informed the committee members that the unification of the exchange rate windows in June 2023, has ushered in a new approach to the management of the exchange rate, aimed at reducing arbitrage, rent-seeking behaviour and speculation in the market.

“The policy aims at creating a market where the demand and supply of foreign exchange determines the exchange rate. The premium has narrowed and our focus on increasing the autonomous FX supply would lead to more stability and further narrowing of the premium.”

While noting a positive outlook for the domestic economy, the CBN boss said that the economy maintained a modest growth trajectory in 2023 despite significant headwinds.

He said real GDP grew by 2.51 percent in Q3 2023 compared to 2.25 percent in the corresponding period for 2022, 2.51 percent in the preceding quarter and 2.34 percent in the first quarter of 2o23.

According to him, the growth was on account of sustained improvement in the performance of the non-oil sector driven by increased investments in the sector and sustained fiscal and monetary stimulants to critical sectors of the economy.

The governor, however, noted that headwinds to the domestic outlook remain rising energy prices, external debt service obligations, security challenges, legacy infrastructure deficit, tightening global financial conditions, and a slowdown in consumer demand due to impacts of inflation on purchasing power.

Cardoso disclosed that trade in the third quarter of 2023 stood at NN18.8 billion while exports were valued at N10.3 billion and total imports stood at N8.4 billion.

“This represents a positive trade balance, which would lead to an increase of the external reserves “, he said.

He, however, stated that due to domestic prevailing factors, less revenues would be earned from oil exports in 2024.

He noted that the OPEC projects a steady rise in global crude oil demands by about 10. million barrels per day through 2027. And in Nigeria, crude oil prices stood at $82.6 per barrel at the end of November.

Read also: Outlook: CBN to maintain tight monetary policy in 2024

“However, the country’s production has been below these thresholds. The budget benchmark for 2023 was 1.69 million barrels per day but the highest level of production was 1.35 in Q3 2022

“We expect less revenue from oil exports due to the production limit of 1.78 m barrels per day in 2024. OPEC approved quota for Nigeria is 1.8 million bpd which is higher than the 2024 budget assumption”, he noted

“We intend to fully consult with the industry and various stakeholders before releasing any information”, Cardoso said.