Why CBN expects positive domestic economic outlook in 2024

Thu, Feb 8, 2024
By editor
3 MIN READ

Economy, Featured

By Anthony Isibor

THE domestic economic outlook released by the Central Bank of Nigeria, CBN, shows that the Federal Government of Nigeria anticipates a 3.76 percent real GDP growth in 2024

The projection, which is slightly surpassing the estimated 3.75 percent for 2023, is also in line with the global economic outlook, despite GDP growth outperforming expectations in 2023, is projected to further moderate in 2024 due to tightened financial conditions, sluggish trade expansion, and reduced business and consumer confidence.

This is even as the International Monetary Fund, IMF, initially projected a mild slowdown in global economic growth to 2.9% in 2024 now reviewed upwards to 3.1 with Asia driving the majority of the projected global growth in 2024, similar to the previous year

Although the domestic economic outlook expectations look ambitious since the global economy is currently grappling with persistent challenges, including inflation and subdued growth prospects, the CBN’s optimism is backed by key government reforms and the expectation of improved crude oil prices and production, which are set to drive economic growth, says Olayemi Michael Cardoso, Governor of the CBN.

Cardoso, who made the disclosure at a Sectoral debates by the House of Representatives on Tuesday, explained that although each sector may face unique challenges and opportunities in 2024, the services sector is expected to thrive due to increased digital lending offerings, while the agriculture sector is projected to grow faster with improved productivity.

He said that anticipated growth in the industry sector is linked to increased crude oil production, while inflationary pressures are expected to decline due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent, aided by improved agricultural productivity and easing global supply chain pressures.

The CBN Governor averred that the CBN’s inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities.

He noted that to address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs, enforcing the Net Open Position limit, and adjusting the remunerable Standing Deposit Facility cap.

According to him, the shift to a market-driven exchange rate was intended to create a stable macroeconomic environment and discourage currency hoarding. However, short-term volatilities are attributed to arbitrage and speculation.

“Honourable Members, we understand the economic costs of these developments not just for the economy, but also as they affect ordinary Nigerians.

“However, as I have mentioned in previous engagements, these costs are temporary, and our decisions will address a lot of fundamental issues bothering Nigeria’s macroeconomic landscape. These measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation,” he added.

Realnews reports that the Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative Forex demand, inadequate Forex supply due to non-remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.

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-February 08, 2024 @ 12:25 GMT|

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