Will Nigeria’s economy record stronger rebound in H2’24?

Nigeria is poised to experience a stronger economic rebound in the second half of 2024, driven by ongoing economic reforms that are set to moderate inflation and stabilize the naira. Abiola Rasaq, Head of Corporate Strategy at the Central Securities Clearing System, shared insights on the country's economic performance and outlook for the rest of the year in a recent interview on CNBC Africa. Rasaq expressed optimism about Nigeria's economic prospects, emphasizing that while the first quarter GDP growth of 2.98% was lower than the previous quarter, it exceeded the same period in 2023. He attributed this seasonal dip to typical first-quarter sluggishness in sectors like agriculture and investment decision delays. Despite inflation peaking at 43% in May, Rasaq noted that drivers of inflation were beginning to moderate, hinting at a more stable price environment ahead. The exchange rate has also shown signs of stability, bolstered by increased capital inflows and policy reforms. Rasaq highlighted the Central Bank of Nigeria's efforts to clear outstanding FX demands and enact regulatory measures to attract foreign investments. He predicted that rising exports, both oil and non-oil, coupled with improving macro fundamentals, would drive economic activity in the second half of the year. However, concerns linger over budget implementation and borrowing plans. Nigeria's Senate extended the timeline for the 2023 budget implementation, raising questions about fiscal sustainability. Rasaq urged the government to streamline budget cycles and prioritize infrastructure spending while acknowledging challenges in funding. He emphasized the potential of the local debt market to finance deficits and support economic growth. Looking ahead, tapping into the debt capital market remains a viable option for Nigeria, given the domestic market's capacity and global interest rate trends. Anticipated reductions in foreign borrowing costs could further incentivize local financing and stimulate economic development. Harmonizing monetary and fiscal policies will be crucial in addressing structural obstacles and unlocking growth potential. As Nigeria navigates the complexities of economic recovery, policymakers are tasked with aligning strategies to enhance resilience and foster sustainable growth. The upcoming Monetary Policy Committee meeting and ongoing reform efforts will play a pivotal role in steering the nation towards a more robust economic outlook for the remainder of 2024.