Nigeria is projected to grapple with sustained economic instability in 2024 due to double-digit inflation, according to a report by the Economist Intelligence Unit (EIU). The analysis includes several other countries such as Angola, the DRC, Egypt, Ethiopia, Ghana, Sudan, and Zimbabwe, where inflation is anticipated to remain robust, primarily influenced by elevated oil prices, potentially exerting adverse effects on economic conditions.
The report states:
“Inflation will run strong into 2024 and remain a central story for several large economies, including Angola, the DRC, Egypt, Ethiopia, Ghana, Nigeria, Sudan, and Zimbabwe. These countries will continue to suffer the economic instability generated by another year of double-digit consumer price inflation, largely driven by elevated oil prices.”
The EIU further predicts double-digit currency depreciation in Nigeria and four other African countries in 2024 due to unsupportive monetary policies. The report emphasizes the challenges faced by the Central Bank of Nigeria (CBN), citing a lack of sufficient firepower to adequately supply the foreign exchange market or clear existing forex backlogs. It anticipates high inflation and a widening exchange rate premium leading to an unstable exchange rate with periodic devaluations.
The report explains:
“In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved. High inflation and a continued spread with the parallel market will leave the exchange rate regime unstable and result in periodic devaluations.”
Despite the previous day’s gain of the local currency against the dollar on the official market, the naira is projected to face challenges, with potential fluctuations and uncertainties in the foreign exchange market.
Nigeria recently reported an inflation rate of 27.33% for October, marking an 18-year high and continuing a ten-month streak of increased inflation. The Central Bank of Nigeria has acknowledged the possibility of ongoing inflationary pressures in the near term.
As economic conditions remain complex, the EIU’s forecast underscores the need for strategic policy measures to address inflation and stabilize the currency, providing a foundation for sustained economic growth.
