In a recent analysis aired on Arise Television, Dr. Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), provided a nuanced forecast for Nigeria’s economic trajectory in 2024. His projection, amidst cautious optimism, highlighted a potential for stability after the turbulent economic growth experienced in 2023.
Dr. Yusuf noted that 2023 was a year marked by pivotal transitions that included the national elections, a critical event during this period, that brought about economic uncertainties, casting a shadow of doubt and impact on the country’s economic rhythm. There’s also the introduction of the Naira redesign policy, which further complicated matters, disrupting the initial quarters of 2023 significantly.
Addressing these challenges, Dr. Yusuf stated, “We had the political transition, which has to do with elections, which came with its issues, which impacted the economy, especially around uncertainty. And of course, we had the terrible Naira redesign policy, which practically messed up the first quarter, going into the second quarter of 2023.”
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However, he noted that there have been strides since then. The government has gradually adapted to these reforms, seeking to reduce dependence on imported petroleum products. These efforts are expected to alleviate pressure on the currency market, potentially leading to a stabilization of economic conditions.
“Government efforts to decrease dependence on imported petroleum products… are projected to ease pressure on the currency market and stabilize economic conditions,” he noted.
Additionally, the CEO cited the Central Bank’s strategic handling of foreign exchange maturity obligations and fiscal consolidation measures as positive contributors to the anticipated stability.
“Government efforts to decrease dependence on imported petroleum products, a major drain on foreign exchange reserves, are projected to ease pressure on the currency market and stabilize economic conditions,” he noted.
“The Central Bank of Nigeria’s approach to addressing the backlog of foreign exchange maturity obligations further contributes to expected currency stability.
“Government initiatives aimed at fiscal consolidation and boosting revenue generation are anticipated to strengthen the overall economic landscape.”
Dr. Yusuf also highlighted the differential impact of these economic shifts across various sectors. Sectors heavily reliant on imports or grappling with soaring energy costs are anticipated to confront significant challenges. Conversely, sectors boasting strong local content or advanced stages of backward integration are expected to display resilience in the face of these challenges.
“The higher your exposure [to foreign exchange], the higher the challenges, the higher the shocks,” Dr. Yusuf said.
The Manufacturers Association of Nigeria (MAN) corroborated these concerns, projecting a cautious outlook for the manufacturing sector in its “Manufacturing Sector Outlook for 2024.” MAN anticipates that forex-related challenges and high inflation rates will restrict manufacturing performance until at least mid-2024. It foresees average capacity utilization hovering around the 50% mark during this period. However, a modest improvement in manufacturing output is anticipated in the third quarter as these challenges gradually ease.
Dr. Yusuf’s analysis entails a cautious optimism for 2024, acknowledging the varied impact of economic shocks on different sectors based on their exposure to forex and energy costs. Despite the challenges outlined by both CPPE and MAN, there exists a tentative hopefulness for Nigeria’s economic stability in 2024.
“I don’t share the view that 2024 will be worse than 2023. Of course, those challenges will persist, especially for manufacturing.
“Challenges around foreign exchange, particularly for manufacturing businesses and even other businesses that have high foreign exchange exposure,” Dr Yusuf said.
The delicate balance between governmental interventions, sectoral adaptability, and the gradual mitigation of economic shocks might pave the way for an improved economic outlook by the year’s end.