Inflation to likely drop, naira to appreciate in 2024, says Rewane

Bismarck Rewane, chief executive officer (CEO) of Financial Derivatives, says Nigeria’s exchange rate is expected to appreciate as inflation drops in 2024.

Speaking at the recently held Parthian Partners 2024 economic outlook session in Lagos, Rewane said inflation is likely to “drop in 2024 and could go as low as 17 percent in 2025”.

The economist’s views on inflation and the trading performance of the naira — Nigeria’s local currency — comes after Olayemi Cardoso, the nation’s central bank governor, took a similar position last Thursday.

The inflation rate recently hit a record high of 28.2 percent, indicating a return to an era witnessed in 2005.

On December 10, the naira tumbled to an all-time low of N1,099 against the dollar, at the country’s official exchange rate window.

But Rewane said “once inflation begins to decline, the exchange rate naturally appreciates because the exchange rate pass-through starts slowing down”.

The economist, however, said inflation would climb further in early 2024 as a result of market changes and ongoing currency volatility on the black market.

“Base effects are expected to kick in by mid-year, with inflation moderating to an average of 23.6 percent in 2024 from an average of 24.4 percent in 2023. The decline in inflation will naturally lead to exchange rate appreciation,” he said.

Speaking on economic trends in 2023, Rewane said the naira fell by 26 percent to N1,050/$ in 2023.

“There were higher energy prices with diesel price up by 34.01 percent to N1,050 per liter (year-on-year), fuel price up by 233 percent to N630 per liter (year-on-year), while money supply growth went up 36 percent (year-on-year) to N67.18trn in September,” he said.

Meanwhile, Rewane stressed that investment in Nigeria is a substantial contributor to the country’s gross domestic product (GDP).

Speaking on the interrelated structure of the global economy, the CEO said Nigeria has a number of international issues that could influence the trajectory of the economy in 2024.

This, he said, encompasses geopolitical events, trade dynamics, rising market trends, and artificial intelligence.