Cardinal Stone projects 3.5% growth for Nigeria in 2024

Nigeria's economic outlook for 2024 has been projected to show signs of improvement, with Cardinal Stone forecasting a potential growth rate of around 3.5%. The report also anticipates a peak in inflation by March, followed by a moderation in the latter part of the year. Olaolu Boboye, Lead of Macroeconomic and fixed income research at Cardinal Stone, recently appeared on CNBC Africa to discuss the macroeconomic landscape and the investment climate in Nigeria. The 2023 economic performance was characterized by challenges across key indicators such as growth, inflation, and fiscal position. The average growth rate stood at 2.5%, attributed to government-initiated reforms that inadvertently led to increased inflation. Inflation levels hit an 18-year high, fueled by policy changes including the removal of subsidies and a significant effects devaluation. The fiscal position raised concerns about the sustainability of Nigeria's debt trajectory, with a notable increase in debt levels due to various factors. Looking ahead to 2024, Cardinal Stone's optimistic forecast of a 3.5% GDP growth rate hinges on several factors. The expected improvement in oil production backed by government interventions such as offshore exploration, revitalizing dormant oil fields, and efforts to combat oil theft, aims to boost the oil sector's performance. Despite an anticipated growth in oil production, Nigeria still lags behind historical averages. Additional drivers of growth include increased consumption supported by rising wages in the private sector, positive outlook for the trade and FMC sectors, and continued growth in the services sector fueled by ICT advancements and mobile money services. In terms of foreign exchange developments, the forex market remains a key area of focus. The expected benchmark exchange rate of 1,000 Naira against the dollar is closely monitored alongside reports of a potential policy rate hike by the Central Bank of Nigeria (CBN). The CBN's hawkish stance and investor sentiments are also key considerations, particularly with a focus on recapitalization in tier two and tier three banks. The CBN's commitment to clearing FX backlogs, although a positive step, is seen as a small drop in a larger pool of outstanding backlogs totaling $6.5 billion. Despite this, the CBN's efforts to address these backlogs, along with expected inflows from various sources, signal a positive outlook for the FX market. Foreign investors continue to monitor Nigeria, awaiting further commitments from the CBN. While foreign inflows may remain subdued initially, there is optimism for a resurgence in foreign portfolio investments towards the end of the year. The return of foreign investors could potentially inject momentum into Nigeria's economy, paving the way for enhanced investment opportunities in the country.