Nigeria’s economy faces headwinds despite CBN’s policies — PwC

PwC, a professional tax and advisory firm, has said Nigeria’s economic outlook remains uncertain in spite of efforts made by the Central Bank of Nigeria (CBN) to ensure stability in the FX market to attract investors.

It said that the rising inflationary trends and volatility in the country’s exchange rate is plaguing uncertainties to the FX market, dampening investors’ confidence.

“Despite the hawkish stance by the CBN to maintain stability, Nigeria’s outlook is still quite uncertain as investors remain cautious of a complex and ambiguous macroeconomic environment,” PwC said in its latest Nigeria Capital market report.

The Olayemi Cardoso-led CBN who came into office late last year after major governmental policies had been made began to roll out inflationary targeting measures to rein in Nigeria’s now three decade high inflation.

The apex bank embarked on an orthodox monetary policy by gradually raising the country’s interest rates, hiking it by a total 800 basis points to 26.75 percent in less than a year, this is in line with its price stability mandate.

But this measure is yet to taper the high consumer prices which is forcing Nigerians to forgo basic necessities as purchasing power dwindles.

“Inflation rate was majorly driven by food inflation rate which rose from 25.25% in June 2023 to 40.87% in June 2024, owing to insecurity, climate change and emigration in food producing regions,” PwC said.

The earlier sharp swings of the country’s FX which has now been relatively controlled saw the naira emerge as the best performing currency in the world in March/April but not long after it lost its steam and its fortune reverses.

Though the naira is straddling between N1,500 – N1,600 per US dollar, it has now been quoted as the second least performing currency across the globe in July, according to Bloomberg.

“Naira crashed against the dollar by 48% between H1 2023 (N770.38/$) and H1 2024 (N1470.19/$), following the unification of exchange rates and FX scarcity,” PwC said in its report.

PwC stated that an increment in Africa’s biggest oil producer’s capacity and the government’s effort to ensure food security will crash inflation and reduce the cost-of-living crisis, thereby improving its macroeconomic landscape.

“With the potential increase in our oil refining capacity, government initiatives to mitigate food shortages, as well as the loan from the African Development Bank to bolster food production, there is optimism for alleviating inflation,” the report said.

It also added that the ongoing banking recapitalisation is expected to set the right foundation that will support the achievement of the $1 trillion economy by 2030 as well as provide opportunities for the growth of the equities market.