CBN Is Optimistic That 2024 Will Trigger Reduction in Rising Inflation and Exchange Rates

The Central Bank of Nigeria (CBN) in Abuja announced it would act on the rising inflation and exchange rate in 2024. The bank also revealed that there will be fewer revenue exports in the 2024 fiscal year, just as it declared that the total trade from the Nigerian Foreign Exchange stood at N18.804 billion in Q3 2023.

This was presented by the CBN Governor, Olayemi Cardoso, as he revealed all these at the National Assembly Joint Committee on Banking, Insurance, and Other Financial Institutions.

Mr. Cardoso explained to the committee from both chambers of the National Assembly that the digital economy in Nigeria will experience a positive trend as both exchange rates and inflation will endure the fluctuating pressures on them and stabilize at the end.

He said,

• The outlook for the domestic economy remains positive and is expected to maintain a positive trajectory in 2024.

• Inflationary pressures may persist in the short term but are expected to decline in 2024.  Exchange rate pressures are also expected to reduce significantly with the smooth functioning of the foreign exchange market.

He informed the committee that the implementation of the unification of the exchange rate windows that happened in June 2023 introduced a new model for managing the exchange rate aimed at reducing arbitrage, rent-seeking behaviour, and speculation in the market.

He said, 

• The policy aims to create a market where foreign exchange's demand and supply determine the exchange rate.

• The premium has narrowed, and our focus on increasing the autonomous FX supply would lead to more stability and further narrowing of the premium.

• Total trade in the third quarter of 2023 stood at N18.804.68 billion. Exports were valued at N10.346.60 billion, while total imports stood at N8.457.68 billion.

• This represents a positive trade balance, which would lead to an increase in external reserves.

In his speech to the committee from both chambers of the National Assembly, he said that due to domestic prevailing factors, less revenue would be earned from oil exports in 2024.

He said,

• We expect less revenue from oil exports due to the production limit of 1.78 mbpd in 2024. The OPEC-approved quota for Nigeria is 1.8 mbpd, higher than the 2024 budget assumption.

• However, the country’s production has been below these thresholds. The budget benchmark for 2023 was 1.69 mbpd, but the highest production level during the year was about 1.35 mbpd in Q3 of 2023.

• The reasons for the underperformance of the oil production target include crude oil theft and pipeline vandalism, production shut-ins, and divestments by major oil companies.

Before the CBN governor spoke to the committee, the Chairman of the joint committee, Senator Tokunbo Abiru (APC-Lagos East), said CBN organized the interactive session for statutory briefings in line with existing laws.

Hon Bahir Bello El-Rufai, Co-Chairman of the Committee, in his remarks, commended the CBN governor and the entire management team on measures being put in place to stabilize the economy generally.