✓ The IMF predicts a potential 35% further depreciation of the Naira in 2024, potentially leading to a 44% inflation peak before monetary policy adjustments.
✓ Nigeria’s monetary policy is deemed insufficient to curb inflation below 20%, amid ongoing pressure on the Naira and absence of local production.
✓ Severe flooding in 2022 worsened agricultural weakness, contributing to a surge in food prices and economic challenges.
✓ To address the situation, Nigeria needs a comprehensive macroeconomic strategy, including aggressive monetary tightening, fiscal adjustments, and climate adaptation measures.
✓ Domestic demand weakens due to declining real incomes, with oil sector investments likely to stall amid rising costs and production declines.
✓ Growth prospects for Nigeria are bleak, with a potential growth rate of zero in 2024 and slow recovery to two percent by 2028.
✓ Fiscal deficits may rise above six percent of GDP in 2024-2025 due to increased social spending and implicit fuel subsidies, leading to higher debt levels.
✓ Nigeria’s ability to access external financing is limited, with declining reserves posing additional risks amid uncertainties over debt repayment and humanitarian needs.
VIA VANGUARD:
The International Monetary Fund (IMF) has warned that the exchange rate of the Naira may further depreciate by about 35 percent this year, adding that this could lead to inflation rate peaking at 44 per cent before the monetary policy tightening could bring the situation under control.
IMF disclosed this in its February 2024 Post–Financing Assessment and Staff Report, noting that the nation’s monetary policy is currently insufficiently tightened to bring inflation below 20 per cent while pressures on the Naira persist.
The report noted that amid the absence of local production and the recent liberalisation of commodity imports, the exchange rate would likely depreciate further.
IMF said Nigeria had been hit by another adverse climate shock in early 2024, following severe flooding in late 2022, which exacerbated the current weakness in agriculture and led to a decline in output and a surge in food prices.
