Good News: CBN Sees Recovery in H2 2024, Forecasts 7 Trends to Drive Economic Growth

• The real sector production of Nigeria is expected to increase by 3.38 percent in 2024, according to the CBN
• The CBN has, however, highlighted seven different elements that will be affected in its macroeconomic outlook
• They include inflation, capital market, external reserves, exchange rate, balance of payment and others

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Due to rising investments in the oil and non-oil sectors, the Central Bank of Nigeria (CBN) has forecast that Nigeria's real sector output will grow by 3.38% in 2024, up from 2.74% in 2023.

The bank stated that the prognosis for the Nigerian economy shows broad resilience, with ongoing growth, predicted inflation moderation, and enhanced exchange rate stability in its forecast on, "Macroeconomic Outlook: Price Discovery for Economic Stabilization."

These are seven additional economic forecasts from the CBN's macroeconomic outlook:

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Inflation

The central bank predicted that inflation would drop from 28.92% in December 2023 to 21.40% by year's end, falling between 19.84 and 25.35%. This puts emphasis on another rate hike.

Due to rising food costs, Nigeria's annual inflation rate increased slightly to 34.19% in June 2024, ranking it as the fourth highest since 1996.

“Core inflation is expected to moderate in 2024 due to sustained restrictive monetary policy stance. The recent adoption of the inflation-targeting lite framework will anchor inflation expectations in 2024, in addition to the favourable effect of moderating global inflationary pressures."

Capital market

After impressive corporate returns in 2023, the CBN anticipates that the capital market would continue to be optimistic in 2024. BusinessDay reported that in 2024, it is anticipated that the yield curve would likewise turn northward and stay normal.

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“Analysis of the market momentum, using the 125-day historical trend, shows that the actual All Share Index (ASI) is greater than the historical average, implying rising investor confidence in the capital market,” the report said.

External reserve

The research projects a little fall in external reserves in 2024 as a result of paying off outstanding debt payment commitments, matured foreign exchange swaps, and foreign exchange (FX).

“The expected improvement in crude oil earnings together with recent reforms in the foreign exchange market and energy sector, however, would cushion the drop in external reserves,” the report stated.

Exchange Rate

The CBN expects that better investor confidence, stronger remittances and a rise in crude oil export receipts will stabilise the exchange rate.

“The recent reforms in the foreign exchange market are expected to entrench efficiency and transparency, narrow the gap between the BDC and the NAFEM rates, and stabilise the exchange rate. The expected rise in crude oil export receipts would provide further impetus to the market, moderate depreciation pressures and strengthen the naira,” the report noted.

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Balance of Payments

A decrease in oil imports and the anticipated reopening of regional refineries like the Dangote and Port Harcourt refineries are predicted to cause a 7.18 percent decrease in overall imports in 2024.

Nonetheless, due to the steady increase in both oil and non-oil exports, exports are predicted to increase by 1.24 percent to $55.21 billion in 2024 from $54.53 billion in 2023.

“The current account is projected to record a higher surplus of $6.96 billion in 2024 from $5.31 billion in 2023, driven by sustained trade surplus from robust export performance and increased diaspora remittances,” the report further said.

The External Sector

Due to a positive trade balance, rising domestic oil output, rising crude oil prices, and the operationalization of the refineries in Dangote and Port Harcourt, the external sector is predicted to strengthen in 2024.

The Fiscal Sector

The analysis projects that the Federal Government's revenue in 2024 will reach N19.6 trillion, up from an expected N8.4 trillion in 2023, a 134 percent increase.

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Two-thirds of the government revenue expected in 2024 will come from taxes, with the remaining 39.2 percent coming from sales and royalties of crude oil and gas as well as from mining and minerals.

“The CBN decided to embark on the publication of Macroeconomic Outlook for the Nigerian Economy to anchor expectations and shape economic outturns,” the report said.

CBN to make changes on interest rates

Legit.ng reported that the governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said the bank would extend its monetary tightening position to control inflation.

The CBN boss said this in a recently published debut outlook, stating that the move is to mitigate some risks and address existing imbalances.

Some of the risks he cited included heightened inflation due to long-standing structural imbalances, which would extend monetary tightening and depressed growth forecasts.

Source: Legit.ng