Decline in Dollar Value of Nigeria’s 2024 Budget Limits Economic Stimulus, Says Bismarck Rewane

Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, has highlighted that the decline in the dollar value of Nigeria’s 2024 budget is restricting the government’s capacity to stimulate economic growth. The proposed budget for 2024 is estimated at $23.71 billion, representing a decrease from $33.59 billion and $27.29 billion for the 2022 and 2023 budgets, respectively. Rewane emphasized the need for efficient use of borrowed funds, citing concerns about Nigeria’s debt sustainability as the country serviced 99% of its revenue in the first half of the year. He projected a GDP growth of 3.3% in 2024, supported by factors such as reduced inflation, improved forex supply, and the Dangote refinery.

Key Points:

• The dollar value of Nigeria’s proposed 2024 budget is $23.71 billion, reflecting a 13% decrease from the 2023 budget’s dollar value of $27.29 billion.
• Rewane expressed concerns about Nigeria’s debt sustainability, citing high debt servicing costs, which reached 99% of revenue in the first half of the year.
• The economic expert emphasized the importance of efficient use of borrowed funds, urging the government to spend on productive sectors to boost revenue sources.
• GDP growth is projected to be 3.3% in 2024, with factors such as reduced inflation, improved forex supply, and the Dangote refinery contributing to the forecast.
• Rewane highlighted the need for government policies incentivizing investment and noted that the production of diesel and aviation fuel in 2024 would reduce forex demand for refined petroleum imports.
• The commencement of production and sale of Dangote refined petroleum to West African countries is expected to enhance Nigeria’s external earnings.
• The volatility of the naira in 2024 is anticipated to decrease, attributed to changes in the forex market structure, reduced capital controls, and increased transparency and price discovery.
• The Central Bank of Nigeria (CBN) is likely to adopt a wholesale Dutch auction system, contributing to a less volatile naira.
• Improvements in Nigeria’s external sector in 2024 are expected, supported by a favorable terms of trade, increased domestic oil production, and the sale of Dangote refined petroleum to West African countries.

Source: Bloomberg