Nigeria’s inflation is expected to decline to 21.5% in 2024 from the 24.5% recorded in 2023, according to the 2024 Macroeconomic Outlook by the Nigerian Economic Summit Group (NESG). The report, released on January 24, highlights key factors influencing this projection and outlines potential inflationary behaviors under different economic scenarios.
The NESG report cites reduced reliance on Ways & Means financing for the budget deficit, a stable structural exchange rate, and proactive monetary measures implemented by the Central Bank as contributors to the anticipated decrease in inflationary pressures. However, it underscores that food inflation is likely to persist, fueled by increased credit costs, security concerns, and internal displacement issues.
The removal of fuel subsidies, as mentioned in the report, is expected to contribute to higher core inflation, particularly through elevated transport and energy costs. The NESG projections offer insights into different inflation scenarios, with rates varying based on economic conditions.
Stagnation Scenario (25.1%): This situation involves a prolonged period of economic slowdown, low or no growth, high unemployment, and overall economic inertia.
Obsolescence Scenario (28.5%): Obsolescence signifies existing economic structures, policies, or practices becoming obsolete, potentially causing challenges or disruptions in the economy.
Comprehensive Overhaul Scenario (21.5%): This scenario envisions a holistic reform approach that results in a more stable inflation rate.
The report identifies risk factors for inflation in 2024, including climate-induced disruptions affecting crop production, insecurity issues, and the persistent weakness of the Naira due to Forex market illiquidity. It recommends setting a cap on petrol pump prices to mitigate the pass-through impact of fuel subsidy removal on both food and non-food item prices.
In 2023, Nigeria experienced an inflation rate of 24.5%, significantly higher than the 18.8% recorded in 2022. Despite the Central Bank of Nigeria’s (CBN) hawkish stance on monetary policy, inflationary pressures persisted. The NESG’s 2024 outlook suggests that productivity limitations, rather than purely monetary factors, have been a significant challenge in controlling inflation.
As the CBN’s Monetary Policy Committee plans to convene on February 26 and 27, indications suggest the continuation of a hawkish stance on monetary rates to address inflation and foster sustainable economic growth, as emphasized by CBN Governor Yemi Cardoso during the NESG 2024 Macroeconomic Outlook presentation.