The Nigerian economy fell short of expectations in the first half of 2024 (H1’24) and will need to achieve at least a four percent growth rate in the next three quarters to meet the federal government’s gross domestic product (GDP) target of 3.88 percent set in the 2024 budget.
Chief Executive Officer of Financial Derivatives Company, Mr. Bismarck Rewane, shared this insight at the 2024 Mid-Year Economic Review and Outlook event organized by the Lagos Chamber of Commerce and Industry (LCCI) in Lagos.
“The economy underperformed expectations in H1’24. Economic growth in Q1’24 was 2.98%, below the government’s benchmark of 3.88%. To reach the target, real GDP must grow by at least 4% in the next three quarters,” Rewane stated.
He also highlighted that in the first half of the year, oil production averaged 1.3 million barrels per day (mbpd), below the budget benchmark of 1.78 mbpd. Additionally, the exchange rate depreciated significantly by 34% to N1,505 per dollar, and inflation soared to a three-decade high of 34.19%.
However, Rewane expressed optimism for the second half of 2024 (H2’24).
“There are positive indicators for H2’24. Oil prices averaged $83 per barrel (pb) in H1’24 and are expected to remain above $80 pb in H2’24. The improvement in the Federal Account Allocation Committee (FAAC) allocations could ease fiscal pressures. A fiscal stabilization fund of N2 trillion could stimulate growth, although it represents only 0.85% of GDP, which is relatively small.
“Implementing a food import waiver could reduce inflationary pressures, though it might also increase currency pressure and hinder domestic agricultural activity,” he noted.
Regarding the upcoming new minimum wage rate, Rewane commented, “Wage increments will boost aggregate demand but pose significant inflation risks. This will test the fiscal sustainability of state governments.”
Earlier, in his welcome address, LCCI President Gabriel Idahosa remarked, “In the first half of 2024, the Nigerian economy faced multiple macroeconomic challenges and high levels of uncertainty.”
