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Nigeria Faces Grim Economic Outlook Inflation Forecasted to Peak at 44percent

By Grace Chigbu

The International Monetary Fund (IMF) has issued a stark warning about Nigeria’s economic future, projecting that the country’s inflation rate could skyrocket to an unprecedented 44% if significant monetary policy measures are not implemented urgently by the Central Bank of Nigeria (CBN).

The IMF’s post-financing assessment report highlights the alarming possibility of Nigeria’s inflation rate reaching such historic highs, particularly if the naira continues to face intense pressures, compounded by potential climate shocks anticipated in 2024.

Under the outlined scenario, where monetary tightening remains inadequate and pressure on the naira persists, coupled with adverse climate conditions, Nigeria’s economic stability could be severely compromised. The IMF also predicts a potential 35% depreciation of the naira in 2024, further exacerbating inflationary pressures.

The report underscores the risks associated with an inflation-depreciation spiral combined with climate shocks, which could strain Nigeria’s ability to repay its debts. While the IMF expresses confidence in Nigeria’s repayment capacity, it acknowledges that addressing urgent humanitarian concerns, such as rising poverty and food insecurity, may necessitate significant trade-offs.

Moreover, recent economic indicators paint a troubling picture. The Nigerian Naira experienced a significant decline against the US Dollar in the official market, closing at an alarming rate of N1,537.96/$1. Persistent demand pressures and a dramatic 74% drop in forex turnover to $84.10 million have further eroded the currency’s value, casting a shadow over economic stability.

Adding to these woes, the National Bureau of Statistics (NBS) reported a significant inflation surge to 29.90% for January 2024, marking a notable increase from the previous month. Despite efforts by the CBN to stabilize the currency through various policies, broad money supply escalated to a record N78.74 trillion as of December 2023, signaling potential further inflationary pressures.

The upcoming Monetary Policy Committee (MPC) meeting of 2024, led by Governor Yemi Cardoso, is crucial. It is expected to address interest rate hikes and strategies to combat rising inflation. However, potential conflicts may arise, especially regarding President Bola Tinubu’s intention to lower interest rates, highlighting the need for cohesive economic strategies in Nigeria’s challenging economic landscape.

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