Steering through turbulent waters
Urgency in advancing the reform agenda
President Tinubu is currently firmly at the helm. We anticipate a notable acceleration in the administration’s reform agenda in 2024. The urgency to expedite reforms arises from the need to confront formidable macroeconomic challenges and steer the nation toward sustainable growth.
Constrained GDP growth
GDP growth will continue to be constrained, remaining in the low single-digit range as household consumption, the most significant component of GDP, continues to reel from the effects of the devaluation of the Naira (NGN) and the removal of petrol subsidies. Further, we forecast GDP growth of 3.1% this year.
A hawkish monetary policy
The exchange rate and price stability are at the forefront of the monetary policy challenge. Consequently, the financial authorities will maintain a tight monetary policy stance. The CBN will likely implement more liquidity management measures to achieve its monetary policy objectives. The policy rate is increasing by at least 100bps to around 19.8%.
Projecting a smaller fiscal deficit
The FGN has adopted an expansionary fiscal stance in 2024. The anticipated revenue improvement following the NGN devaluation underpins the budget hopes. Additionally, there are high hopes of a significant improvement in non-oil revenue due to proposed tax reforms. The projected fiscal deficit for 2024 is 3.9% of GDP (versus our 5.6% estimate for 2023). Although we expect revenues to improve, we maintain a conservative outlook, predicting a 2024 fiscal deficit of c.4.7% of GDP.
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