Assessing Nigeria’s 2024 fiscal & monetary policy outlook

Nigeria's economic landscape is poised for a challenging yet promising year in 2024, as highlighted by Bismarck Rewane, the CEO of Financial Derivatives Company. In a recent interview with CNBC Africa, Rewane shared his insights on the fiscal and monetary outlook for the country, shedding light on key themes that are expected to shape Nigeria's economic trajectory in the coming months. Reflecting on the events of 2023, Rewane emphasized the impact of exogenous shocks such as the war in Ukraine and the Gaza attack, alongside domestic events like elections and litigation in Nigeria. He noted that policy reforms announced in 2023 lacked a clear path for managing their fallout, leading to distortions in the economy. As Nigeria embarks on a new year, the focus shifts to addressing key priorities to drive sustainable growth and stability. Key Points: 1. Moderate Growth Outlook: Rewane anticipates moderate growth in 2024, driven by de-bottlenecking the economy and private sector initiatives. While growth is expected to be tepid, measures to enhance efficiency and productivity could avert a recession. 2. Monetary Policy Direction: Rewane stresses the importance of clarifying Nigeria's interest rate policy and adopting an explicit inflation targeting framework. By gradually increasing interest rates to narrow the gap with inflation, the country aims to bolster investor confidence and attract much-needed capital. 3. Debt Management and IMF Engagement: With Nigeria's debt challenges coming to the fore, Rewane highlights the significance of engaging with multilateral agencies like the IMF for potential policy support. Rescheduling debts, securing new funding, and borrowing at competitive rates are crucial steps in charting a path towards economic recovery. Quote: "For Nigeria, I think one is to accept that there's no silver bullet that's going to solve all the problems. So there are necessary conditions which are not sufficient to solve everything, but it's going to be clear that we have to prioritize the things that we need to do, which will have the maximum impact and linkages on other sectors of the economy." - Bismarck Rewane Looking ahead, Rewane underscores the importance of sectoral sensitivities in a higher interest rate environment. By unpacking layers of sectoral risks and opportunities, he emphasizes the need for strategic investments in critical areas like construction and infrastructure to drive economic transformation. In addressing the challenges of the foreign exchange market, Rewane advocates for market-driven mechanisms, transparency, and clarity on Nigeria's external reserves. By fostering a conducive environment for price discovery and reducing policy restrictions, the country can work towards stabilizing the Naira and attracting foreign inflows. Overall, as Nigeria navigates its economic landscape in 2024, the alignment of fiscal and monetary policies, coupled with strategic reforms and investments, will be instrumental in unlocking growth potential and steering the country towards a path of resilience and recovery.