Budget’s lower dollar value threatens Nigeria’s growth
The decline in the dollar value of the federal government’s budget is limiting its ability to stimulate economic growth, Bismarck Rewane, the managing director of Financial Derivatives Company Limited, has said.
The economic expert showed in a presentation that the dollar value of the proposed 2024 budget stands at $23.71 billion, down from $33.59 billion and $27.29 billion for those of 2022 and 2023 respectively.
“Nigeria is spending less in dollar terms. Fiscal budget of N27.5 trillion [for 2024] is $23.71 billion in dollar terms, 13 percent lower than the dollar value of the 2023 budget: $27.29 billion, limiting the government’s ability to stimulate growth,” he said at this month’s edition of the Lagos Business School Breakfast Meeting.
Nigeria’s debt is becoming unsustainable as the country serviced its debt with 99 percent of its revenue in the first half of this year, according to Rewane.
He said the debt burden will be exacerbated by high interest rates in 2024. “Efficient use of borrowed funds is crucial for its debt sustainability. The federal government must spend on productive sectors to boost revenue sources.”
He projected that the country’s Gross Domestic Product will grow by 3.3 percent next year, up from an estimated growth rate of 2.61 percent in 2023.
The growth forecast is underpinned by reduced pace of inflation, improved foreign exchange supply and Dangote refinery, according to Rewane.
“Nigeria needs government policies that will incentivise investment,” he said.
He said the commencement of production of diesel and aviation fuel in 2024 will reduce demand for forex for the import of refined petroleum and enhance the country’s energy security by reducing vulnerabilities associated with external supply chains.
He said the sale of products to neighbouring countries will boost Nigeria’s external earnings
The naira is expected to be less volatile in 2024, primarily due to change in the structure of the forex market, reduction in capital controls and increase in transparency and price discovery.
“CBN [is] likely to adopt a wholesale Dutch auction system,” Rewane said.
“Nigeria’s external sector is expected to improve in 2024, supported by a favourable terms of trade, increase in domestic oil production, and sale of Dangote refined petroleum to West African countries to push up Nigeria’s foreign exchange earnings
