NESG Projects Nigeria’s Poverty Headcount To Reach 41.5%, Official Exchange Rate N900/1$ In 2024

The Nigerian Economic Summit Group (NESG), an association of organised private sector, has projected poverty headcount in Nigeria to reach 41 percent.

NESG also expects the official exchange rate to hover around N900/US$, while unemployment is anticipated to ascend to around 5.0 percent.

The association said that increase in local crude oil production and a favourable global oil price outlook will sustain the trade surplus and accelerate growth in the country’s external reserves.

While the country’s inflation rate is currently about 28.92 percent, based on December figures from the National Bureau of Statistics (NBS), NESG is projecting inflation to average 21.5 in the year from an estimated average of 24.5 percent in 2023.

The slowdown in inflationary pressure, the association said, would be driven by lower deficit monetisation structurally, relative exchange rate stability, and other heightened monetary measures by the Central Bank of Nigeria (CBN).

NESG disclosed this in its 2024 macroeconomic outlook report, titled “Economic Transformation Roadmap: Medium Term Policy Priorities”, released on Wednesday in Lagos.

According to NESG, food inflation will remain the fundamental driver of inflation due to increased cost of credit, insecurity and internal displacement, adding that the removal of petrol subsidies will continue to increase core inflation, primarily through high transport and energy costs.

“While anticipating enhanced productivity and output in labour-intensive sectors such as Construction, Agriculture, Trade, Manufacturing sectors, the acceleration of unemployment rates are projected to slowdown. The rate is anticipated to ascend to around 5.0 percent, while the poverty headcount is expected to approach 41.5 percent due to improved performance in these job-intensive sectors. With a population growth rate estimated at 3.2 percent, this trajectory is set to bolster the overall impact of economic growth on real per capita income.

“The convergence of these effects and a stable policy environment will bolster foreign capital inflows in 2024. The nation is poised to maintain a trade surplus, accumulate more foreign reserves, and witness a subsiding exchange rate pressure throughout the year. Reduced political risks and improved returns on investments will likely entice the return of confident foreign investors and activate previously dormant funds held by local investors,” NESG said in the report.

“Limited CBN’s intervention in the foreign exchange (FX) market is projected to foster an increase in foreign reserves to approximately US$40.0 billion by the close of 2024.

“Consequently, the official exchange rate is expected to reach N900/US$, signalling a positive trajectory. Likewise, an amelioration in FX shortages is expected to stabilise the operations of the black market, where the exchange rate will exhibit relative stability and depreciate at a slower pace compared to the fluctuations experienced in 2023.

“In 2024, Nigeria’s monetary policy is set to prioritise price stability, leaning towards adopting more tightening measures to sustain this goal. This approach involves maintaining high lending rates to foster an environment conducive to increased investment. Moreover, the dovish policy stance anticipated in developed economies could reverse capital inflows towards developing and emerging markets like Nigeria. Consequently, Nigeria is poised to sustain a high-interest-rate environment to attract these inflows and mitigate inflationary pressures,” the association noted.

With the removal of petrol subsidy, NESG anticipates the government revenue to surge due to substantial savings from subsidies, noting that a reduction in the fiscal deficit will ameliorate Nigeria’s sovereign risks.

“A proposed banking sector consolidation plan for 2024 also aims to fortify Nigeria’s financial market. This initiative is expected to bolster the country’s financial sector and enhance credit availability to the private sector, thereby supporting and stimulating activities within the real sector. In 2024, a reduction in the fiscal deficit is anticipated to ameliorate Nigeria’s sovereign risks,” the association revealed.

“The 2024 budget emphasises deficit reduction, signalling a positive shift in the upward trajectory of revenue, consequently slowing down the growth of the public debt stock. This trajectory is expected to bolster fiscal sustainability. In addition, the implementation of the quick-wins identified by the Presidential Committee on Fiscal Policy and Tax Reforms would further strengthen the fiscal policy environment of the country. Government revenue is anticipated to surge due to substantial savings from removing fuel subsidies and the exchange rate devaluation. Furthermore, the expected rise in crude oil prices and improvements in crude oil production are projected to bolster revenue streams, diminishing the likelihood of debt repayment issues. This, in turn, is poised to reduce potential sovereign risks as the country’s capacity to repay debts strengthens.”

Nigeria’s macroeconomic projections for 2024 are based on the assumption of a global crude oil price averaging US$90/barrel, which is higher than the proposed US$77.96/barrel benchmarked in the 2024 budget.

NESG said: “This projection anticipates a scenario where conflicts in the Middle East disrupt global oil supply and the lingering impact of the Russia-Ukraine crisis maintains a subdued momentum in the energy market. Consequently, this situation is poised to generate surplus demand for crude oil, sustaining elevated prices throughout the year.

“Concurrently, intensified efforts to curb crude oil theft and boost oil production in Nigeria are expected to yield an average crude oil production of 1.75 million barrels per day (mbpd) in 2024. This represents a notable improvement from the 1.30 mbpd recorded in 2023 but stands 1.7 percent lower than the targeted 1.78 mbpd outlined in the 2024 budget.

“This scenario sets the stage for the government to accrue higher revenue in 2024, fostering enhanced budget implementation performance, improved fiscal deficit management, and a possible augmentation of funds allocated towards capital expenditure.”

The real GDP growth is expected to rise rapidly to 3.50 percent in 2024. This, NESG, attributed to “Various reform programmes initiated by the government are expected to trigger an uptick in economic growth as strains on investment are addressed, and low productivity in critical sectors is resolved. The Services sector will remain the economy’s key driver, while the anticipated rebound of the country’s Oil sector will push stronger real GDP growth in 2024.”