High inflation and the gap between the official and parallel market rates of the naira will continue to fuel exchange rate instability and result in periodic devaluations.
This is as the country grapples with an unsupportive monetary policy, piling pressure on the naira.
The Economist Intelligence Unit disclosed this in its recently released ‘Africa Outlook 2024,’ report. It noted that double-digit currency depreciation will continue to be a thing in Nigeria.
It said, “Elsewhere, double-digit currency depreciation is anticipated in the major economies of Egypt, Sudan, Ethiopia, Angola, and Nigeria.
“In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved. High inflation and a continued spread with the parallel market will leave the exchange rate regime unstable and result in periodic devaluations.”
It also predicted that while inflationary pressures may ease from elevated levels recorded in 2023 for all but a small handful of African countries in 2024. It, however, highlighted that inflation will run strong into 2024 and remain a central story for several large economies, including Angola, the DRC, Egypt, Ethiopia, Ghana, Nigeria, Sudan, and Zimbabwe.
It stated that these countries will continue to suffer the economic instability generated by another year of double-digit consumer price inflation, largely driven by elevated oil prices. The research and analysis division of the Economist Group further forecasted that Africa will be the world’s second-fastest-growing major region in 2024, behind Asia.
It said almost all African states will post a positive growth story, with war-torn Sudan and struggling Equatorial Guinea the only economies that look set to contract in 2024.
It declared, “Indeed, 12 of the world’s 20 fastest-growing economies in 2024 will be in Africa, and African real GDP is forecast to grow by 3.2 per cent in 2024, up from 2.6 per cent in 2023.” Nigeria was on the list that contained Senegal, Mauritania, Libya, Rwanda, and more.
