FDC Whispers – March 21, 2024

Dear Subscriber,

GDP growth – Not yet Uhuru

Nigeria’s Q4’23 GDP growth of 3.46%, up from 2.54% in Q3’23, was a pleasant surprise. The oil sector also rebounded after 14 quarters of contraction, offering a flicker of hope at the end of a dark tunnel. Domestic oil production increased by 16% to 1.476mbpd in February 2024 from 1.27mbpd in May 2023. However, there are disturbing trends. Of the 46 activities tracked by the NBS, only nine (19.57%) expanded, while the others (80.43%) either slowed or contracted. Over the horizon, there are emerging trends that could pose downside risks to sustainable and accelerated economic growth.

Insurgency and political misunderstandings becloud economic outlook

Nigeria is the eye of a storm of violent insurrections across some geopolitical zones. Kidnapping in the North West (Kaduna state) and sporadic outbreaks of food protests in the South West (Oyo state). The country seems to be on tenterhooks. No one knows when the next shoe will drop. The most dangerous of these incidents being the Okuama battle between the Nigerian army amphibious battalion and the indigenes of two villages. What was a local dispute escalated to a major crisis. This has the potential to disrupt oil production, with a significant negative impact on the value of the naira in the forex market.

Are monetary policy tools enough?

The monetary policy committee of the CBN is to meet on March 25 & 26. There are divergent views regarding what should be its optimal move following its supersized rate hike of 400 basis points in February. While monetary policy tools may not be sufficient to rein in a 30-year high inflation rate of 31.7%, the CBN is expected to remain focused and consistent with its signal. Although the naira appreciation to N1,490/$ is soothing news, more time is needed to tame an inflation rate that is already on a runaway trajectory. Moreover, given that Nigeria’s inflation is significantly supply- induced, there is need for additional non-monetary reforms (fiscal) to control the elevated inflation in the country.

In this latest edition of Whispers, the FDC Think Tank takes a deep dive into the recent economic developments and the impact on your business and corporate strategy.

Enjoy your read!