By Our Reporter
“A Pan-African Credit Rating Agency, Agusto & Co., identified three major economic variables that are likely to have an impact on Nigeria’s growth in Gross Domestic Product (GDP) in 2024,” stated the agency, Thursday, at a bi-monthly forum of the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
The Head of Financial Institutions Ratings at Agusto & Co., Mr. Ayokunle Olubunmi, emphasized the role of insecurity and exchange rate fluctuations in driving inflationary pressures while elaborating on the potential effects of interest rates, inflation rates, and foreign exchange rates on Nigeria’s GDP growth projections for the year.
“Interest rate is a very good tool that the monetary policy authorities use to monitor and fight inflation and even exchange rates,” explained Olubunmi.
He highlighted the significance of interest rates in shaping economic activities, even as he anticipated that the Monetary Policy Committee of the CBN might increase interest rates by about 500 basis points at the forthcoming MPC meeting to combat inflationary pressures.
However, Olubunmi suggested that the Nigeria’s inflation rate, influenced by insecurity and import costs, could range from 21 percent to 28,2 percent based on different scenarios, stressing the potential challenges of high-interest rates on government borrowing costs, which according to him might deter the MPC from raising rates excessively. He projected that the average interest rate for the year could range between 15 percent and 18 percent, depending on various scenarios.
On foreign exchange, Olubunmi predicted that Nigeria’s earnings would heavily rely on oil revenue, with crude oil prices expected to settle around $70 to $75 per barrel in 2024. Additionally, he anticipated that Nigeria’s crude oil production would not exceed 1.5 million barrels per day for the year.
Overall, Agusto & Co. cautioned that Nigeria’s economic growth in 2024 could be constrained by these economic variables, with GDP projected to range from 2.6 percent to 5 percent under various scenarios.