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In addressing Nigeria’s forex crisis, a recent report from the Nigerian British Chamber of Commerce (NBCC) suggests that boosting crude oil production to meet OPEC’s quota is pivotal for enhancing foreign exchange (forex) market liquidity in 2024.
The 2024 Economic Outlook and Review document, presented by NBCC President and Chairman of the Council, Ray Atelly, underscores the importance of maintaining oil prices around $80/barrel and successfully implementing proposed forex market reforms to combat the ongoing forex challenges.
Key Points:
- The parallel market rate has surged beyond 1,300 to a dollar, indicating the severity of the forex crisis.
- The report emphasizes that Nigeria’s oil production must increase to leverage relatively high oil prices and alleviate pressure from forex illiquidity. OPEC has recently reduced the country’s quota from 1.7 million to 1.3 million barrels daily.
- The NBCC report identifies the immediate challenge as raising crude oil production to capitalize on high oil prices, easing forex illiquidity pressure, and preventing the outflow of domestic wealth.
- The global economic environment is fragile, with a weak growth outlook, escalating geopolitical tensions, and persisting cost levels higher than the pre-COVID era.
- Domestically, Nigeria faces instability, stagflation, forex market illiquidity, and the initial stages of long-delayed reforms.
- Despite projections for output growth ranging from 2.6% to 3.1% in Nigeria, the report notes that this matches population growth, highlighting the need for more significant economic strides.
- Inflation projections by the International Monetary Fund (IMF) show 15.4% by the end of 2024, with an average of 22.9%.
- Worsening inflation prompts a call for a review of wages, aligning with the 2019 National Minimum Wage Review Act of 2019.
- Dr. Doyin Salami, former Chief Economic Adviser to the President, emphasized the fragility of the global environment and the instability of the domestic economy. Key reform areas include restoring economic stability, improving security, and addressing financing constraints.
In a challenging yet defining year ahead, the NBCC urges the Nigerian government to prepare for tough times and implement reforms crucial for economic resilience.
