What to expect from Nigeria’s economy in 2024

Many Nigerians are still smarting from last year’s economic shocks and expecting that things will turn the corner in 2024.

Some analysts and economic experts have projected that the country’s economy will perform better this year on the back of the recovery of the oil sector from recession and gains from the Federal Government reforms.

Last year was tough for Africa’s most populous nation as naira scarcity, the removal of petrol subsidy and naira devaluation increased inflation pressures, poverty, unemployment in the country.

“This year should be better than 2023, but it won’t be the total transformation of the economy or major reduction like in 2023,” Adeola Adenikinju, a professor of economics and president of the Nigerian Economic Society, said.

If inflation continues to trend downwards globally, then it will be good for the economy because it will reduce the extent to which imported inflation will affect local prices, he said.

“I think the central bank will be able to have a better grip on inflation in 2024 and exchange rate. And if that happens, it will have a positive impact on domestic economic activities,” he said.

Olaolu Boboye, an economist and fixed-income strategist at CardinalStone, said he is a bit optimistic about economic growth, largely on the expected recovery from a three-year recession in the oil sector.

He expects improved oil production as the government intensifies offshore exploration, which is less prone to oil theft. “The non-oil sector would remain resilient, aided by the services sector and gradual recovery in the agricultural and manufacturing sectors.”

The country’s GDP rose marginally by 2.54 percent (year-on-year) in the third quarter of last year from 2.51 percent in Q2 and 2.25 percent in the same period of 2022, according to the National Bureau of Statistics (NBS).

Headline inflation rose to an 18-year high of 28.2 percent in November from 27.33 percent in October. In Q2, the unemployment rate rose to 4.2 percent from 4.1 percent in Q1.

Foreign investments plunged to $654.7 million in Q3, the lowest in at least 11 years, from $1.03 billion in the previous quarter. The country’s currency depreciated by 49.1 percent to N907.1 at the end of 2023 from N461.6 in 2022 on the official market.

President Bola Tinubu, in his nationwide broadcast on Monday, acknowledged the current difficulties but urged Nigerians to remain steadfast. He assured them that “tough times never last,” and that the government was committed to improving the lives of all citizens.

Expectations for 2024

Analysts at Afrinvest Limited

The outlook for 2024 is cautiously optimistic, predicated on robust liquidity dynamics and positive inflation – interest rate – expectations.

Based on our scenario models, GDP growth, inflation and FX rate would average 3.0 percent, 22.1 percent and N918.89/$1 in 2024 blue-sky case, while the average outcomes could deteriorate to -1.5 percent, 24.7 percent and N1.057.19/$1 should policy fatigue and external risks mount.

We anticipate that the Central Bank of Nigeria (CBN) might adopt a restrictive stance to counter large inflows in the first half of the year. This could be the major upside trigger for yields. However, we see pathways for tapering of yields into the second half with dovish pivots by systematic central banks, moderating inflation and less restrictive CBN stance as potential factors to weigh on the yield environment.

Analysts at Cordros Securities Limited

The local macroeconomic environment will improve relative to 2023. Our expectation is hinged on the gradual phasing out of the current impact of petrol subsidy and FX reforms on the non-oil sector, and higher crude oil production relative to 2023 levels amid supportive oil prices.

Others are FX supply improvement in line with the authorities’ expectations of FX inflows from arrangements with international banks, and anticipated disinflationary trend in the second half of 2024.

We expect foreign investors’ sentiments to improve next year, given the recent monetary authorities’ actions in sucking financial system liquidity and ensuring naira assets are attractive, even as the government is expecting FX inflows up to $10 billion from different sources.

Interest rates are bound to rise further into the coming year, as the CBN looks to maintain its price stability mandate, anchor inflation expectations, increase incentives for holding the naira, and boost FX inflows from foreign investors.

World Bank’s latest development report on Nigeria

The recent reforms are expected to undo the increases in poverty seen in recent years from 2024 onward, albeit only marginally and slowly.

Sluggish growth and rising inflation have increased poverty from 40 percent in 2018 to 46 percent in 2023, pushing an additional 24 million people below the national poverty line.

Inflation will gradually decline in 2024 and beyond if monetary policy tightening is accelerated. The reform of the petrol subsidy increased some prices, mainly for petrol purchases for vehicles and generators, as well as transport-related costs.

Consequently, headline inflation is expected to rise from an average of 18.8 percent in 2022 to 24 percent in 2023. However, the reform of the subsidy will become disinflationary starting in H1 due to fiscal consolidation.

This will help to reduce financing from the CBN, consequently lowering money supply growth and dissipating the impact of the initial large gasoline price increases.

Similarly, while the depreciation of the naira contributes to short-run inflation, over time a more transparent, market-reflective, and flexible exchange rate, underpinned by monetary policy tightening, is also likely to be more stable, thereby easing the pressures on inflation.

Financial Derivatives Company Limited, led by economist Bismarck Rewane

Nigeria’s GDP is expected to grow by 3.3 percent, up from an estimated growth rate of 2.61 percent in 2023 underpinned by reduced pace of inflation, improved foreign exchange supply, Dangote Refinery and improved investment.

The country’s business environment will improve as the policy direction becomes clear and inflation will increase at a slower pace in 2024 due to reduced pace of currency depreciation, monetary policy tightening, CBN moves to reduce deficit financing and ease in global commodity prices.

Vetiva Capital Research

For Nigeria, the year promises a delicate dance between opportunities and challenges. Growth expectations remain hinged on oil production, with the potential for increased refining activities acting as a potential catalyst.

However, the removal of fuel subsidies and its inflationary impact, coupled with a continued tightening of monetary policy, pose significant risks.

Additionally, low net reserves raise concerns about the naira’s stability, adding to the uncertainty surrounding Nigeria’s economic outlook.

Lasisi Lukman, a research assistant at Lagos Business School’s Public Sector Initiative

The country’s GDP has been projected to rebound with a forecasted growth rate of 3.76 percent but that is ambitious.

Looking at the precedence, it is unrealistic to reach the level being anticipated. Nigeria’s unemployment was 4.2 percent in Q2. But we anticipate that it might rise to about eight percent to 10 percent because of the current economic realities.

The tightening immigration policies being implemented by various countries like the United Kingdom, Canada and Australia would cause the ‘japa’ wave, a Yoruba word for run quickly, to decline.

The naira will continue to depreciate in 2024

SBM Intelligence

The CBN will not be able to accomplish its goal of achieving 95 percent financial inclusion next year. As it proceeds with its recapitalisation of banks, the commercial bank count will fall below 20, down from the current count of 24.

Consumer spending will continue to be pressured in 2024, decreasing non-essential consumer spending. There will be a rise in diaspora remittances due to more Nigerians migrating abroad for work.

More foreign firms with manufacturing plants in Nigeria will close their shops and transit to importation and trading due to pressure occasioned by forex unavailability.

The unemployment rate will rise as companies struggle to stay afloat in a challenging economic environment. Organised civil unrest will not ensue in opposition to the government, given the Nigerian Labour Congress’s diminished capacity to galvanise the populace against governmental excesses.