Nigeria’s Inflation is expected to decrease to 21.5% in 2024, as per NESG’s Macroeconomic Outlook
The Nigerian Economic Summit Group (NESG) has released its 2024 Macroeconomic Outlook, projecting a decline in inflation to 21.5% from the 24.5% recorded in 2023. The report, unveiled on January 24, 2024, attributes the expected reduction in inflationary pressures to diminished reliance on Ways & Means financing for the budget deficit, a stable structural exchange rate, and proactive monetary measures implemented by the Central Bank.
Despite this positive trend, the report highlights that food inflation is anticipated to persist as a major contributor to overall inflation. Factors such as increased credit costs, security concerns, and internal displacement issues are identified as key drivers of ongoing food inflation challenges.
The report noted, “The removal of fuel subsidies will continue to increase core inflation, primarily through high transport and energy costs.”
NESG Forecasts Varied Inflation Scenarios for 2024
The Nigerian Economic Summit Group (NESG) has presented diverse projections for potential inflation behaviors in 2024. According to the report, under the scenario of “stagnation,” the inflation rate could reach 25.1%. Stagnation denotes an extended period of economic slowdown, low or no growth, high unemployment, and overall economic inertia.
In the event of “obsolescence,” the report suggests that inflation could rise to 28.5%. Obsolescence signifies a situation where existing economic structures, policies, or practices have become outdated, posing potential challenges or disruptions to the economy.
Contrastingly, under the scenario of a “comprehensive overhaul,” the report anticipates a lower inflation rate of 21.5%. This scenario envisions a comprehensive restructuring of economic structures, policies, or practices. The NESG’s nuanced analysis provides insight into potential inflation trajectories based on different economic scenarios in the upcoming year.
Professional Summary of NESG’s Inflation Report for 2024
The recently released report by the Nigerian Economic Summit Group (NESG) underscores key risk factors contributing to inflation in Nigeria for the year 2024. These factors include ongoing climate-induced disruptions, particularly flooding, combined with pervasive insecurity, which may result in diminished crop production and exert upward pressure on food prices.
The report further highlights the sustained weakness of the Naira, attributed to Forex market illiquidity, as another risk factor influencing inflation.
To address these concerns, the report recommends considering a cap on petrol pump prices, noting its potential to mitigate the pass-through impact resulting from the removal of fuel subsidies on both food and non-food item prices.
It is pertinent to note that in 2023, Nigeria recorded an inflation rate of 24.5%, marking a 5.7 percentage point increase from the 18.8% in 2022. Despite the Central Bank of Nigeria’s (CBN) resolute stance on monetary policy, with the Monetary Policy Rate fixed at 18.75% and a Cash Reserve Ratio of 32.5%, inflationary pressures persisted.
The NESG’s 2024 Macroeconomic Outlook suggests that inflationary pressure primarily stems from productivity limitations rather than monetary factors. This poses challenges for the CBN’s interventions aimed at controlling inflation.
As the CBN’s Monetary Policy Committee is scheduled to convene on February 26 and 27, it is anticipated that the central bank will maintain its hawkish stance on monetary rates.
Speaking at the NESG 2024 Macroeconomic Outlook, Yemi Cardoso, the CBN Governor hinted at this stance, noting, “In this challenging landscape, the policy priorities involve ensuring durable inflation reduction, addressing fiscal pressures, and fostering sustainable and inclusive growth. The global management policy environment is expected to remain restrictive until sustained inflation reduction becomes evident.”
