Survive or Thrive? Brace Yourself for Nigeria’s 2024 Economic Journey by Coronation Merchant Bank Economic Research
Ready or not – Nigeria’s economic outlook presents mixed signals. Will it be a year of cautious optimism or one that tests our resilience? Let’s explore the twists and turns that lie ahead together.
Our 2024 outlook predicts a smooth rise in the global economy, with GDP growth cruising at a comfortable 3.1% annually. This is a positive sign for Nigeria, but don’t get too comfortable. Global uncertainties and local issues such as insecurity, along with exchange rate volatility (fluctuations in the value of the Naira) could still throw us off course.
However, there’s good news to come. The Nigerian government is forecasting a 3.76% jump in GDP for 2024, a welcome improvement compared to the sluggish 2.74% of 2023. Nonetheless, the economy isn’t fully recovered. Inflation remains stubbornly high, and it could reach a hefty 27.5% by year-end.
Inflation’s bite is undeniable – shrinking wallets and disrupting businesses. Striking the right balance between curbing it and fostering economic growth remains a demanding challenge.
To fight inflation, the government has repeatedly tightened monetary policy, typically achieved by raising interest rates. While this slows down inflation, it also makes borrowing more expensive for businesses, potentially dampening investment.
Specifically, in our base-case scenario, we anticipate an increase in the Monetary Policy Rate (MPR) to 25.25%. For a detailed analysis of this and its potential effects, see our Economic Report here.
The intent here is not to dampen your spirit.
Remember, despite the difficult economic terrain, there is a bright spot in Nigeria’s economic journey. Non-oil Industries like finance, telecoms, and construction are expected to be the driving force behind economic growth, even amidst current challenges.
More so, the non-oil sector, has emerged as the engine of our economy (contributing 70% of GDP), and has continued its steady growth in the last quarter of 2023, reaching 3.1% compared to 2.75% in the previous quarter.
While the oil sector also saw a 12.1% year-over-year (y/y) increase in Q4’23 compared to 2022, it’s important to consider the bigger picture. Over the past 3 and half years, oil production has been on a downward trend. This recent growth might be a temporary blip, not a sign of a lasting revival.
Nigeria’s economic future presents both challenges and opportunities. By acknowledging these complexities present in our 2024 economic journey, implementing well-designed policies (including those to support both the oil and non-oil sectors), address insecurity, foster collaboration between the government, businesses, and individuals, we can navigate this economic crossroads and chart a course towards a brighter future. Dive deeper. Do not miss our full report here for detailed analysis. SOURCE: Coronation Merchant Bank Economic Research
