Standard Bank predicts 1.59m bpd oil output, naira to trade at N1,171/$ in 2024

Standard Bank says Nigeria’s crude oil production, including condensates, will increase significantly to 1.59 million barrels per day (bpd) in 2024.

According to a report by the bank, titled, ‘African Markets Revealed (AMR), the projected average crude oil volume will result from the combined effect of additional production streams and the government’s continuous anti-crude oil theft and vandalism campaigns.

“Crude oil production, encompassing condensates, is expected to increase significantly, to 1.59 million barrels per day (bpd) in 2024, from an estimated 1.43 bpd in 2023,” the report reads.

“This may come from primarily the cumulative impact of the government’s ongoing anti-crude oil theft and vandalism efforts, coupled with new production streams.

“The agricultural sector is also likely to grow faster in 2024. We expect output to increase by 2.2% y/y in real terms (2023: 1.0% y/y), supported by low base effects from previous periods of lower-than-average productivity due to poor weather conditions in food-producing regions.”

According to Standard Bank, the manufacturing industry will likely continue to face obstacles in 2024, including rising interest rates, increased consumer price levels, volatility in foreign exchange rate (FX), and liquidity challenges.

‘SERVICES SECTOR TO GROW BY 3.9% IN 2024’

However, the firm said the commencement of operations at the Dangote refinery should bolster oil refining — a sub-sector within manufacturing.

“We forecast the refinery to make up 1.0% of manufacturing gross value added, thereby driving growth in the sector to 2.4% y/y in 2024, from an estimated 1.4% y/y in 2023,” the report reads.

“Elsewhere, we expect the trade, telecommunications, finance & insurance, and transportation sub-sectors to be the key drivers of the services sector’s growth in 2024, offsetting a deceleration in wholesale and retail trade relative to 2023, likely to be caused by subdued demand on the back of persistent currency pressures and inflation.

“For the banking sector, we anticipate a normalization of the impact of FX revaluation gains in H2:24, which, in conjunction with a tighter monetary policy environment, would impose potential downside risks to the growth of financial institutions.

“All factors considered, we forecast 3.9% y/y growth for the services sector in 2024, compared to 4.2% y/y in 2023.

“Downside risk factors to our GDP growth forecast include worsening FX liquidity, high inflation, increased insecurity, and lower crude oil production.”

‘NIGERIA’S ECONOMY TO GROW BY 3.4% YEAR-ON-YEAR’

The bank also expects Nigeria’s economy to grow by 3.4 percent year-on-year in real terms in 2024 — compared to an estimated 2.6 percent for 2023.

“Our forecast hinges on our anticipation for the oil sector delivering 11.8% y/y full-year growth because of higher crude oil production, as well as the non-oil sector’s growth improving slightly, to 2.9% y/y, from a 2023 growth estimate of 2.8% y/y,” Standard Bank said.

‘NAIRA TO TRADE AT N1,171 PER DOLLAR’

According to the report, the naira is expected to trade at N1,171/$ by December 24, 2024.

“We see the USD/NGN pair at 1,171 by Dec 24 in the official market. The CBN is likely to keep gradually clearing its foreign currency obligations with funds from the FGN and NNPC capital raises, shifting FX liabilities away from the CBN, which would liberate FX reserves to support the market and foster investor confidence,” the bank said.

Until the market regains confidence in Central Bank of Nigeria (CBN) reserves, Standard Bank projected only a gradual improvement in foreign private sector inflows.