Nigeria is anticipated to grapple with economic instability throughout 2024, marked by double-digit inflation, as highlighted in a report by the Economist Intelligence Unit (EIU). This forecast extends to several other African nations, including Angola, the DRC, Egypt, Ethiopia, Ghana, Sudan, and Zimbabwe. The EIU attributes the persistence of high inflation in these countries to elevated oil prices, which is expected to have adverse effects on their economic conditions.
The report emphasizes that while inflationary pressures are projected to ease from the elevated levels of 2023 in some African countries, a handful, including Angola, Seychelles, Sudan, and Tanzania, will continue to experience upward pressure on consumer price inflation due to country-specific factors. The easing of consumer price pressures is viewed positively by policymakers and households, but for larger economies like Angola, the DRC, Egypt, Ethiopia, Ghana, Nigeria, Sudan, and Zimbabwe, economic instability is anticipated to persist into 2024 with another year of double-digit consumer price inflation, primarily driven by heightened oil prices.
In addition to inflation concerns, the EIU predicts that Nigeria and four other African nations will witness double-digit currency depreciation in 2024, attributed to unsupportive monetary policies. The report reiterates its earlier stance on the Central Bank of Nigeria, asserting that it lacks the capacity to adequately supply the foreign exchange market or address existing forex backlogs. High inflation and a widening exchange rate premium are expected to contribute to an unstable exchange rate in these countries, resulting in regular devaluations.
The report specifically mentions that Nigeria’s unsupportive monetary policy will keep the naira under pressure, and the central bank’s limitations in supplying the market or clearing forex backlogs will unsettle foreign investors. The combination of high inflation and a widening gap with the parallel market is anticipated to maintain an unstable exchange rate regime, leading to periodic devaluations.
Turning to recent market developments, InfoStride News reported fluctuations in Nigeria’s currency exchange rates. While the naira recorded a gain against the dollar on the official market one day, it experienced a loss against the dollar on another. The official market exchange rate was N841.14/$1, representing a 2.63% drop from the previous day’s close of N818.99. The significant spread between the afternoon high of N1140/$1 and the intraday low of N600/$1 underscores the volatility in the exchange rate. The day’s foreign exchange turnover, according to the official NAFEM window, decreased by 26.43% to $127.65 million.
Moreover, InfoStride News highlighted Nigeria’s inflation rate, which surged to 27.33% in October, marking an 18-year high. This figure represents a 0.61% increase from the previous month and signifies ten consecutive months of rising inflation. The Central Bank of Nigeria (CBN) has acknowledged that prevailing inflationary pressures may persist in the near term.
In summary, the Economist Intelligence Unit’s forecast for Nigeria and other African nations in 2024 suggests prolonged economic instability characterized by double-digit inflation and currency depreciation. The challenges outlined in the report align with recent market fluctuations, emphasizing the importance of addressing inflationary pressures and implementing supportive monetary policies to ensure economic stability in the coming year.
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