Inflation may decelerate to 26 per cent this year, says Agusto
* Seeks strict rules to stabilise financial market
THE sustenance of monethe possibility of a weaker tary tightening, reducnaira and higher petrol tion in the use of Ways and prices are major risks to this Means advances by the federforecast. al government, more stable It added that the possible naira, base effects and conescalation of the Israelsumer resistance will cause Hamas conflict into a regioninflation to reach an inflecal crisis would trigger a spike tion point by mid- 2024, and in oil prices, with consebegin a gradual decline to an quences for domestic petrol average of 26 per cent in pricing.
2024, Agusto & Co ., a The rating agency said it is research agency, has said. optimistic that the services
In its monthly newsletter , sector particularly telecom‘ 2024: A Y ear of Reckoning, munications and financial Turning Points and services will remain the Balancing Acts’, the agency biggest driver of growth in provided a proviso that 2024, and with the 2024 growing insecurity in major budget signed into law, policy food- producing parts of the direction, and priorities, have country’s middl e belt and been given more clarity, and, as a result, it expects less uncertainty and improvements in business confidence, adding, “overall, we forecast a modest increase in GDP growth to 3.1 per cent in 2024.”
Though the immediate future may look bright, the rating agency noted that in 2024, the impact of the policy- induced shocks, which cascaded through the Nigerian economy in 2023 and severely weakened the macro picture, is expected to linger.
It explained: “This is due to and despite significant progress, at least theoretically, in the dismantling of some of the deep- rooted structural and policy impediments that ha ve constrained Nigeria’s economic performance for decades. The pace and scale of promarket reforms ( petrol subsidy ‘ reduction’ and exchange rate liberalisation), once heralded as unprecedented, ha ve lost steam.”
It lamented that high energ y costs, multiple taxations and foreign exchange illiquidity continue to constrain the business environment, which is triggering the exit of multinational manufacturers and intensifying the wave of emigration of middle- class Nigerians.
It declared that the tepid economic growth, elevated price levels, a weakening naira, deteriorating debt, and poverty statistics all paint a bleak picture and raise several questions. Amid the glaring glooms, it noted the gradual resurrection of crude oil production, which is supported by security measures to combat theft and vandalism, with a 16 per cent increase to an a verage of 1.3 million barrels per day in 2023, Nigeria’s OPEC- sanctioned quota of 1.5 million barrels per day poses a significant limitation to export earnings.
In this recovering matrix, the agency said the expected resumption of domestic crude oil refining with the Dangote refinery and the re- commencement of operations at the Port Harcourt oil refinery coming onstream soon.
BUA Group’s 250,000 bpd refinery and petrochemical plant in Akwa Ibom State which is expected to start operations in late 2024 will push Nigeria’s combined refining capacity to 1.4 million barrels per day of crude oil by the end of the year.
Overall, the report said it expects a likely increase in foreign exchange supply, and stability, on the back of improved crude oil production and some foreign currencydenominated inflows will benefit manufacturing, trade and other import- dependent activities.
However, it was quick to note that the manufacturing output will suffer from the negative effects of the recent divestments in the sector, saying, “we anticipate a marginal increase in aggregate consumption, spurred by the expected modest increase in the minimum wage, but the sustained impact of higher petrol prices and a weaker naira will weigh this down. High borrowing costs could trend even higher as a rejuvenated CBN tightens its policy stance further in response to the need to rein in inflation and attempt to push real returns to positive territory. This would heighten credit risks, limit lending to the real sector and weigh on the country’s GDP growth prospects. However, it is worth mentioning that the need to manage the FGN’S borrowing costs and keep them in check may restrict the potential increase in interest rates.”
Expressing worries over the domino effects of the discontinuation of intervention measures by the CBN as well as the recent escalation of conflict in major food- producing areas in the country’s middle belt have cast a shadow of gloom over crop production prospects.