In a recent revelation regarding Nigeria’s economic prospects, the Nigerian Economic Summit Group (NESG) foresees a decrease in the country’s inflation rate to 21.5 per cent in 2024, down from the 24.5 per cent recorded in 2023. The NESG unveiled these insights as part of its 2024 Macroeconomic Outlook report on January 24.
The report indicates that this expected decline in inflationary pressures is due to strategic changes, including reduced reliance on Ways & Mean financing, maintaining a stable structural exchange rate, and the implementation of proactive monetary measures by the Central Bank.
However, the NESG’s report highlights lingering concerns about food inflation, fueled by increased credit costs, security challenges, and internal displacement. Additionally, the removal of fuel subsidies is anticipated to contribute to higher core inflation through increased transport and energy costs.
The NESG explored different scenarios for inflation in 2024. Under the hypothetical conditions of “stagnation,” the rate could climb to 25.1 per cent, while in the case of “obsolescence,” it might reach 28.5 per cent. A more optimistic scenario, labeled as a “comprehensive overhaul,” points to a 21.5 per cent inflation rate.
Risk factors outlined in the report include climate-induced disruptions affecting crop production, the persistent weakness of the Naira, and potential challenges from the removal of fuel subsidies.
The NESG suggested implementing a cap on petrol pump prices as a measure to mitigate the impact of fuel subsidy removal on both food and non-food item prices.
In 2023, Nigeria witnessed a significant inflation spike, recording a rate of 24.5 per cent, marking a 5.7 percentage point increase from 2022. The NESG attributed this to limitations in productivity rather than monetary factors.
Despite the Central Bank’s efforts to adopt a hawkish stance on monetary policy—with the Monetary Policy Rate set at 18.75 per cent and the Cash Reserve Ratio at 32.5 per cent—inflationary pressures persisted throughout 2023.
As the Central Bank’s Monetary Policy Committee gears up for its meeting on February 26 and 27, the NESG anticipates the Bank will maintain its cautious stance on monetary rates, considering the current challenging economic landscape.
