The Central Bank of Nigeria, CBN, has projected that the external reserves could reduce slightly in 2024 on the back of debt service and other obligations.
This was disclosed in the maiden edition of CBN 2024. Macroeconomic Outlook: Price Discovery for Economic Stabilisation, which was recently released.
The outlook said, “The external reserves, which stood at $33.09bn in 2023 could reduce slightly in 2024. This is on the assumption of continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service. The expected improvement in crude oil earnings, together with recent reforms in the foreign exchange market and energy sector, however, would cushion the drop in external reserves.”
On July 8, Nigeria’s foreign reserve crossed $35.05bn, the first time in about a year and has remained above that mark since then.
As of Thursday, the country’s external reserves stood at $35.77bn.
Also, the outlook projected a marginal increase to $19.42bn from $19.17bn in 2023 for diaspora remittances.
“This is on account of the expected improvement in global economic conditions and reforms in the foreign exchange market that allow international money transfer operators to pay beneficiaries at market-determined exchange rates. Similarly, the ongoing efforts by the Bank to improve efficiency, transparency and confidence in the foreign exchange market is expected to boost remittances through formal channels,” the outlook said.
On public debt, the report said it was expected to maintain an upward trajectory, but remain on a sustainable path in 2024, saying, “The expected trajectory of public debt is underscored by planned infrastructural investment, social interventions, and the securitisation of the Ways and Means Advances to the FGN.”
Meanwhile, in the foreword of the outlook, the Governor of the CBN, Olayemi Cardoso, stated that the bank would extend its monetary policy tightening stance to tame the rising inflation.
He said, “To mitigate some of the risks and address existing imbalances, it is imperative to intensify monetary tightening to subdue inflation risk, sustain reforms to strengthen the foreign exchange market and tackle security issues around the food belt and oil installations.
The outlook for the Nigerian economy indicates broad resilience, with continued growth, expected moderation of inflation, and greater exchange rate stability. The outlook is shaped by continued improvements in the domestic production and refining capacity of crude oil, as well as the expected rise in crude oil prices that could prop growth to 3.38 per cent in 2024 from 2.74 per cent in 2023.”
On inflation, the CBN governor said, “Inflation, though still elevated, is projected to moderate to 21.40 per cent, within a range of 19.84 and 25.35 per cent, from 28.92 per cent in December 2023, as the transition to an inflation-targeting lite framework and increasingly tight monetary policy stance effectively anchors expectations. Liquidity conditions are expected to be adequately tight, as the yield curve shifts upward and buoys capital inflows.”
Despite the positive outlook, there were risks that the CBN governor listed, including security challenges, supply-side shocks, and global geoeconomic fragmentation which could aggravate inflationary pressures.
“Elevated inflation, due to long-standing structural imbalances, could extend monetary tightening and depress growth potentials. Oil theft, pipeline vandalism, and an unlikely decline in crude oil price could also constrain fiscal space, hamper foreign exchange receipts, lower accretion to the external reserves, heighten pressure in the foreign exchange market and undermine domestic stability,” he concluded.
