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2024 new budget, old challenges

The FGN recently presented the N27.5 trillion 2024 budget proposal to a joint session of the 10th National Assembly in Abuja. The proposed budget hopes to achieve job-rich economic growth (3.76%), price stability (inflation: 21.4%, exchange rate: N750/$%), a better investment environment, and poverty reduction. However, these ambitious budget numbers are anything but close to the reality of the average Nigerian, who cares less about budgetary arithmetic if the prices of major staples like bread and rice don’t decrease. Already, the inflation rate has peaked at an 18-year high of 27.33%, with no signs of slowing soon. More so, 63% of the total population is multidimensionally poor.

Naira trading flat but blowing on the wind

Of all the challenges Nigeria faces today, the naira’s steep depreciation is the most problematic, as the official exchange rate is down 59.4% to N1,137/$ YTD, falling short of the proposed CBN and FGN target of N750/$. Though the central bank governor, Olayemi Cardoso, in a briefing last week, reaffirmed the apex bank’s commitment to settling FX backlog and stabilising the naira, the parallel market rate holds strong above N1000/$, with the spread between the official rate widening to 37% from 8% post-FX liberalisation. Nigeria is at a crossroads, and it will take a lot more than public commitments to reduce speculation. The CBN needs to be transparent about its FX moves and stay on the path of monetary policy orthodoxy.

GDP Q3, a pointer of things to come

Meanwhile, in Q3’23, the Nigerian economy grew modestly to 2.54% from 2.51% in Q2’23, despite the high inflation and tough operating environment. The sluggish improvement in growth can be attributed to the lingering effects of fuel subsidy removal and exchange rate unification, which are stifling output growth. Looking ahead, it will take time for these structural reforms to unlock productivity to support GDP growth, especially in the real sectors of the economy like agriculture that struggle with climate change and insecurity.

In this latest edition of FDC Whispers, the Think Tank embarks on an in-depth analysis of recent economic shifts within fiscal and monetary policy, shedding light on what lies ahead in the weeks to come.

Enjoy your Read!