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The Central Bank of Nigeria (CBN) has projected a slight reduction in external reserves for 2024, primarily due to debt service and other financial obligations.
This projection was disclosed in the inaugural edition of the “Central Bank of Nigeria 2024 Macroeconomic Outlook: Price Discovery for Economic Stabilisation.”
The report stated, “The external reserves, which stood at $33.09 billion in 2023, could see a slight decrease in 2024. This anticipated dip is due to continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service. However, the expected improvement in crude oil earnings, coupled with recent reforms in the foreign exchange market and energy sector, is likely to cushion the decline in external reserves.”
As of July 8, Nigeria’s foreign reserves surpassed $35.05 billion for the first time in about a year and have remained above that threshold since. By Thursday, the external reserves stood at $35.77 billion.
The outlook also forecasted a marginal increase in diaspora remittances, rising to $19.42 billion from $19.17 billion in 2023. This projection is based on the anticipated 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. Efforts by the CBN to improve efficiency, transparency, and confidence in the foreign exchange market are also expected to boost remittances through formal channels.
Regarding public debt, the report indicated it is expected to maintain an upward trajectory but remain sustainable in 2024. This is attributed to planned infrastructural investments, social interventions, and the securitization of the Ways and Means Advances to the Federal Government of Nigeria (FGN).
In the foreword of the outlook, CBN Governor Olayemi Cardoso stated that the bank would continue its monetary policy tightening to address rising inflation. He emphasized the need to intensify monetary tightening to mitigate inflation risks, sustain reforms to strengthen the foreign exchange market, and tackle security issues affecting the food belt and oil installations.
The outlook for the Nigerian economy suggests broad resilience, with continued growth, expected moderation of inflation, and greater exchange rate stability. It is shaped by improvements in domestic production and refining capacity of crude oil and the anticipated rise in crude oil prices, which could boost growth to 3.38% in 2024 from 2.74% in 2023.
On inflation, Governor Cardoso noted, “Inflation, though still elevated, is projected to moderate to 21.40%, within a range of 19.84% to 25.35%, from 28.92% in December 2023, as the transition to an inflation-targeting framework and increasingly tight monetary policy stance effectively anchors expectations. Liquidity conditions are expected to remain adequately tight, with the yield curve shifting upward and buoying capital inflows.”
Despite the positive outlook, Governor Cardoso highlighted several risks, including security challenges, supply-side shocks, and global geoeconomic fragmentation, which could exacerbate inflationary pressures. He cautioned that elevated inflation due to long-standing structural imbalances could extend monetary tightening and depress growth potentials. Additionally, oil theft, pipeline vandalism, and potential declines in crude oil prices could constrain fiscal space, hamper foreign exchange receipts, lower accretion to external reserves, heighten pressure in the foreign exchange market, and undermine domestic stability.
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