Pan-African Credit Rating Agency Agusto & Co. has predicted a shift in crude oil prices, estimating that they may settle between $70 to $75 per barrel in 2024, down from an average of $80 per barrel in 2023. Additionally, the agency forecasts that Nigeria’s crude oil production will not exceed 1.5 million barrels per day in 2024.
Nigeria’s 2024 budget, benchmarked at $77.96 per barrel and 1.78 million barrels per day, is already under scrutiny due to the recent drop in oil prices, raising concerns among stakeholders about potential funding challenges.
Addressing the Finance Correspondents Association of Nigeria (FICAN) at a forum in Lagos, Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., highlighted three crucial economic variables that could significantly impact Nigeria’s GDP growth in 2024.
Olubunmi emphasized that interest rates, inflation rates, and foreign exchange rates would play pivotal roles in determining Nigeria’s GDP growth. According to him, the best-case scenario, according to does not exceed 5% for the year given the GDP growth is projected at 2.6%, while the base case scenario suggests 3%.
He highlighted the relationship between interest rates and economic activities, suggesting that higher interest rates could moderate economic activities. He anticipated an increase of about 500 basis points in interest rates during the forthcoming Monetary Policy Committee (MPC) meeting.
Despite the potential impact on borrowing costs, the Nigerian government’s massive borrowing may influence the MPC’s decision on raising interest rates. Olubunmi predicted an average interest rate of around 18% (best case) and 16% (base case) for the year.
In terms of inflation, he identified insecurity as a major driver, with insurgency, kidnapping, and general insecurity affecting regions that produce goods consumed nationwide. Agusto & Co. projected a best-case inflation targeting scenario at 21%, a base case or average inflation rate of 26.1%, and a worst-case scenario of 28.2%.
Olubunmi emphasized that a multitude of factors, including countervailing variables, would influence the inflation rate, making it essential to address various challenges comprehensively.
As global events unfold, stakeholders in Nigeria closely watch the economic indicators, hoping for resilience and adaptability to navigate potential challenges and sustain growth in 2024.
Nigeria, heavily reliant on oil revenue for its foreign exchange earnings, faces uncertainty about the impact on its economy as global tensions rise and concerns about a potential crash in crude oil prices.
