Economic Outlook: Interest Rates, Inflation, and Exchange Rates Forecast to Shape Nigeria’s 2024 GDP- Olubunmi

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A Pan-African Credit Rating Agency Agusto & Co.has identified three major economic variables that are likely to fareaching impact on Nigeria’s growth in Gross Domestic Product (GDP) in 2024.



Agusto & Co is a leading provider of industry research and knowledge in Nigeria & Sub-Saharan Africa.


At the bi-monthly forum of the Finance Correspondents Association of Nigeria (FICAN) heald in Lagos on Thursday, the Head, Financial Institutions Ratings Mr.
Ayokunle Olubunmi explained how the level of interest rate, inflation rate and the rate of foreign exchange will drive Nigeria’s GDP growth to 2.6 percent in severe case scenario, 3 percent as a base case scenario, but at best, will not exceed 5 percent this year.


Specifically, Olubunmi said that interest rate is a very good tool that the the monetary policy authorities use to monitor and fight inflation and even exchange rates.
According to him, everything in Nigeria today is pointing towards higher interest rates because one of the reason why there is a lot of pressure on the naira is that there is a low interest rate environment, stressing that high rates moderate economic activities.


That is why there are high expectations that the Monetary Policy Committee of the CBN will increase interest rate by about 500 basis point at the forthcoming MPC meeting this month he said.

However, the Nigerian government is borrowing massively and if interest rate is high, the cost of government services will also be high. This might discourage the MPC from raising the rates too high, adding that the average interest rate for the year might hover around 18 percent (best case scenario) and 16 percent as the base case scenario while it is expected that interest rate will not decrease below 15 percent.
Ut should be recalled that the 364-day treasury bills stop rates increased to 19 percent per annum on Wednesday. February 7,2024.


The 182-day and 91-day bills also rose to 18 percent and 12.2percent and some analysts said the rates will likely continue to rise in the coming weeks as the CBN intensifies efforts to combat exchange rate depreciation.


On inflation, he said “Insecurity is one of the major drivers for inflation. Unfortunately, insurgency, kidnapping and general insecurity are rife in the middle belt where they produce a lot of things that we consume. “


Nigeria’s inflation has been on the rise for 11 consecutive months, reaching a new high in December 2023, according to the National Bureau of Statistics (NBS). The annual inflation rate rose to 28.92 per cent in December from 28.20 per cent in November.


According to him, aside from insecurity, the increase in exchange rate is also going to affect inflation. And because Nigeria is an important dependent country, rising cost of importation will have effect on the inflationary situation which will invariably affect growth.



According to Olubunmi, a lot of factors affect inflation and the projection of the CBN governor Olayemi Cardoso can only be realized if all the countervailing variables have been addressed.



To this effect, he said stated that the best case scenario for inflation targeting is 21 percent, base case or average inflation rate for 2024 he said would be 26.1 percent while the worst case scenario would be 28.2 percent.



He said Nigeria’s foreign exchange earnings this year will depend majorly on oil revenue and that the price of crude oil which averaged $80pbl in 2023 will likely settle around $70 to $75pbl in 2024 and that Nigeria’s crude oil production can not exceed 1.5 barrels per day in 2024.

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