Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), has hinted on the reduction of fuel costs this year.
The CBN boss said that inflationary pressures are expected to decline in 2024 due to the apex bank’s inflation-targeting policy.
This, he said, will have far-reaching implication across various sectors of the economy, noting, “We believe that the naira is currently undervalued”.
Cardoso, who stated these on Wednesday in his keynote address at the launch of the Nigerian Economic Summit Group’s (NESG) Macroeconomic Outlook for 2024 in Lagos, also hinted that Nigerians will begin to see a reduction in the prices of petroleum products.
Cardoso, who spoke virtually at the event, said the country is now at a turning point.
He said, “I want to assure you that we are now at a turning point, and the bold reforms being undertaken across different segments of the economy, while initially challenging, are ultimately directed towards addressing these challenges in a sustainable manner.
“I am confident that we are already witnessing positive outcomes, and these will undoubtedly become more apparent in the near future.
The dedicated and relentless efforts being made are certain to bring about significant and positive changes for our economy.
“Indeed, recent reports from international rating agencies such as Fitch, Moody’s, and commendations from multilateral banks like the World Bank reflect this, with upgrades to Nigeria’s ratings from stable to positive”.
These reports, he said, acknowledge the possible reversal of the deterioration in the country’s fiscal and external position due to the authorities’ reform efforts. While noting the painful adjustments, he said, “They all identify a direction of travel that will unlock the much-needed growth and development for our economy in the medium to long term”.
He added that the anticipated moderation in pump prices of premium motor spirit (PMS), also known as petrol, due to the expected operational status of the country’s key government and privately-owned refineries in 2024 is a pivotal factor in the economic equation.
“The expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience”, he said.
He added,
“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent.
This will be aided by improved agricultural productivity and the easing of global supply chain pressures, benefiting businesses by boosting consumer confidence and purchasing power.
“The CBN’s adoption of the inflation-targeting framework involves clear communication, use of monetary policy instruments, and collaboration with fiscal authorities to achieve price stability, fostering market confidence and positively influencing consumer behaviour.
“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lowered policy rates, stimulating investment, fueling growth, and creating job opportunities.
Additionally, the bank has reverted to the conventional monetary policy approach with a focus on attaining price stability, which fosters sustainable economic growth for Nigeria”, the CBN governor said.
On the initiatives on foreign exchange, Cardoso said the bank’s collaboration with the Ministry of Finance and the NNPCL to ensure that all FX inflows are returned to the central bank is yielding results as the coordinated effort will greatly enhance the bank’s FX flows and contribute to the accretion of reserves.
He said, “The expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN.
This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage.
“The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors.
“We are implementing a comprehensive strategy to improve liquidity in our FX markets in the short, medium, and long term and our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years”.
He said the projections for the nation’s economy paint an optimistic trajectory as the Federal Government of Nigeria anticipates real GDP growth of 3.76 percent in 2024, slightly surpassing the estimated 3.75 percent for 2023.
“This optimism is underpinned by the implementation of key government reforms set to shape the economic landscape.
Foremost among the factors contributing to this positive outlook is the expectation of improved crude oil prices and production, highlighting the crucial role the oil industry is expected to play in driving economic growth.
“Furthermore, the optimistic scenario receives support from businesses’ perception of the overall macro economy for the first half of 2024, as indicated by the December 2023 Business Expectations Report.
“Specifically, the positive outlook for industry, services, agriculture, and mining, electricity, gas and water supply sub-sectors reflects the potential effect of market-based reforms through private investment and SMEs-led growth that would contribute to business improvement and confidence.
Government reforms in the mining and energy sub-sectors are expected to serve as a catalyst for growth and development.”
While the potential for growth exists in 2024, he stressed that each sector may encounter unique challenges and opportunities.
“The services sector is expected to maintain its dominance, driven by mobile money adoption, increased government partnerships, and expanded digital lending offerings.
Continued digitisation and government support for financial inclusion initiatives are poised to drive growth in the fintech sector in 2024.
“The agriculture sector is expected to grow at a faster pace due to improved productivity and efficiency resulting from the projected decline in inflation, access to finance, and infrastructure investments.
Anticipated growth in the industry sector is tied to the expected increase in crude oil production, arising from improved surveillance and infrastructure, better maintenance of plants, and increased investments in the oil sector”.
