By Chinwendu Obienyi

Managers of the Nigerian economy are battling severe storms and struggling to steady the ship.

But the grim picture currently unfolding was foretold by President Bola Tinubu when he junked the  petrol subsidy regime and later floated the naira; two actions that tossed the naira into an uncontrollable spin.

Tinubu said the journey of Nigeria’s economic emancipation would be rough initially but joy would come thereafter.

Since then, the monetary and fiscal wings have forged an alliance to ensure tranquility and growth pervade the economic space.

Last week’s report from the National Bureau of Statistics (NBS), showed that Nigeria’s headline inflation rate advanced for the 14th consecutive month by 180 basis points (bps) year-on-year (y/y) to 31.7 per cent in February 2024, presented a new record high in over three decades.

The report showed that from a month-on-month (m/m) perspective, the headline rate printed at 3.1 per cent (prior month: 2.6 per cent), reflecting continued price pressure on food and core inflation sub-baskets.

The food inflation index nudged higher to a record 37.9 per cent y/y (previously: 35.4 per cent), while the m/m reading printed at 3.8 per cent from 3.2 per cent in January 2024, making it the highest since the NBS began tracking the data in 2009.

Responding to the report, economic analysts noted that the increased consumer prices synchronised with the impact of low food supply relative to demand, lingering currency pressures and higher energy prices amid the unfavourable base effects from the prior year.

The inflation rate, which presents significant hurdles, also prompts shifts in perspective and strategies aimed at fostering economic resilience.

Although, inflation rate is expected to increase moderately in the next reporting month, a crucial aspect of navigating high inflation is strategic planning to navigate potential uncertainties and downside risks, ensuring resilience and stability amidst evolving macroeconomic dynamics.

Historically speaking, Nigeria is known to have strategic planning but the failure to successfully implement those plans has been a challenge.

Further analysis of the NBS report showed that Nigeria’s gross non-oil tax revenues from Corporate Income Tax (CIT) and Value Added Tax (VAT) improved by 73 per cent and 44.9 per cent y/y respectively to N4.9 trillion and N3.6 trillion in 2023, highest nominal values on NBS record. Disaggregating proceeds by collection source, foreign CIT grew faster (up by 107.4 per cent y/y to N2.4 trillion) than the domestic CIT (up 49.5 per cent y/y to N2.5 trillion), although the latter accounts for majority share (51.3 per cent) of the total collection (N4.9 trillion). Similarly, non-import foreign VAT sub-component rose the highest, up by 61.4 per cent, local non-imports VAT grew by 42 per cent while Nigerian Customs Service (NCS)-import VAT grew by 37 per cent. There are other segments like the financial, insurance, ICT, arts, entertainment worthy of mentions but whilst these impressive data might be connected to the spike in the exchange rate conversion gains, it is imperative that the government continues to sustain their initiatives such as ensuring the full adoption of the TaxPro technology created by the First Inland Revenue Service (FIRS). Understandably, even with the provision that allows for up to 50 per cent deduction as cost of collection on CIT and the uneven distribution model of net VAT (FG share; 15 per cent, States share; 50 per cent and LGs share; 35 per cent), the FG’s actual CIT available for the budget already outperformed the annual set target by 66 per cent at N1.5 trillion in the 9 months of 2023, while VAT was just adrift of the annual target of N383.1 billion as per data from the Ministry of Budget and Economic planning. Thus, the growth of the non-tax revenue channels may slow down considerably if the lingering downside risks in the business environment persists.

Need to enhance Nigeria’s agricultural dynamics

Over the past 10 quarters, the agriculture sector has experienced an average growth of 1.7 per cent y/y, contributing about 25 per cent to the total GDP. However, the latest data from the NBS indicated that the cost of food is the major driver of inflation in the country. The increase in the price of bread, cereals, potatoes, yam and other tubers, fish, meat, oil, fruit, coffee, tea and cocoa were identified as focal points.

Despite being an agrarian country, industry sources suggest that Nigeria’s cumulative agricultural imports in the past five years stood at N6.7 trillion. The country’s reliance on agricultural imports has doubled since 2019 despite government’s effort to promote domestic agriculture.

While agriculture’s share in Nigeria’s total export earnings remains low (2.1 per cent) compared to crude oil (82.5 per cent), there is considerable potential for growth. Sustainable public-private partnerships can enhance agro-related exports, diversify foreign exchange revenue and support overall GDP growth. Agreed that the Africa Continental Free Trade Area (AfCFTA) agreement is expected to boost agricultural activity, create new regional markets for farmers and strengthen the agro-value chain, however, increased focus on value chain interventions, especially in areas of comparative and competitive advantage is crucial. There has to be a gradual shift to embracing technological advancement and mechanisation, focus on elevating quality standards of agricultural produce on the global stage, strengthening the entire agricultural value chain, enabling access to credit, enabling policies amongst others.

Navigating consumption and currency swirl in the manufacturing sector

In recent years, Nigeria’s manufacturing sector has experienced fluctuations in output growth, heavily influenced by the movement of crude oil prices and forex availability. Looking beyond Nigeria, examples from countries like China and Morocco offer valuable insights into strategies for nurturing vibrant manufacturing sectors. China’s shift towards boosting domestic consumption of locally made products underscores the importance of self-sufficiency and reducing reliance on imports. Similarly, Morocco’s transformation into a manufacturing hub highlights the significance of strategic investments in infrastructure and trade agreements to stimulate sectoral growth.

As Nigeria navigates the complexities of AfCFTA, there is a pressing need to fortify the domestic manufacturing sector. This requires substantial improvement in infrastructure, product standards, and service delivery to enhance competitiveness within regional value chains. Despite recent contractions in manufacturing sector growth, concerted efforts towards reform and innovation hold the key to unlocking its full potential in Nigeria’s economic landscape.

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On another note, the Dangote refinery is expected to catalyse downstream industries and value-added manufacturing activities in Nigeria. The availability of locally refined petroleum products at competitive prices can stimulate growth across various manufacturing sectors that rely on these inputs, such as plastics, chemicals, fertilizers and pharmaceuticals. Furthermore, by reducing input costs and enhancing supply chain reliability, the refinery can spur investment, innovation and expansion within these industries, fostering greater value addition and industrialisation. Additionally, the refinery has the potential to create employment oppourtunities and promote skills development within the manufacturing sector and related industries.

Monetary policy, FX and financial intermediation

The CBN’s efforts in stabilising the naira, recognising the high pass-through effect on domestic prices with efforts like improving dollar supply from the CBN to the forex market, monetary tightening, and higher domestic interest rates, has been impressive. Similarly, there have been about seven circulars from the apex bank in its efforts to stabilize the country’s FX market. However, with the recent rise in inflation, the bank may be pushed to its wits end to checkmate this challenge especially when its Monetary Policy Committee (MPC) takes place.

Explaining the MPC’s decision to raise interest rates last month, the CBN Governor, Olayemi Cardoso, said MPC members were concerned about the persistent rise in the level of inflation and emphasised the commitment to reverse the trend.

“Previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent. Members concluded that inflation could pose more regulatory challenges in the near and medium term if not effectively anchored,” he said.

According to him, non-monetary factors were driving inflation and the CBN is targeting an inflation rate of 21 per cent at the end of the year.

He said, “We are out to tighten money supply and have a robust strategy in place to rein in inflation. We expect that this decision will have effect in the short-to-medium term. We are working with the fiscal authorities to tackle the soaring inflation so that the other side of inflation that is not within our control, can be managed better.”

Experts react

Speaking to Daily Sun, the Managing Director, Coronation Merchant Bank, Banjo Adegbohungbe, noted that the outlook for Nigeria’s economy in 2024 is cautiously optimistic and added that projections indicate a moderate improvement, largely driven by anticipated recovery in the oil sector and government initiatives.

He said that despite the resilience observed in sectors like services, agriculture, and manufacturing, significant challenges persist, including inflationary pressures, unemployment, and foreign exchange rate volatility.

According to him, various factors such as global inflation trends and prudent monetary policies offer some hope.

Adegbohungbe said, “Forecasts suggest that a continued decline in global inflation could mitigate the impact of imported inflation on domestic prices, fostering a conducive environment for economic activities. Furthermore, efforts to boost oil production through offshore exploration and the reduction of petrol subsidies are expected to support economic growth. Hence, I will say that the government’s dedication to attracting foreign investments and stabilising the currency further indicates a positive trajectory.

“The CBN is poised to play a crucial role in addressing these challenges, with expected shifts in monetary policy and foreign exchange management strategies expected to influence market dynamics. While the outlook for 2024 appears promising, proactive measures are necessary to tackle lingering vulnerabilities and capitalise on emerging oppourtunities.

“A collaborative approach involving policymakers, regulatory authorities and the private sector will be essential in guiding Nigeria’s economy towards sustainable growth and resilience amidst evolving global dynamics and turbulence.”

Chief economist and head, Economic Research/Intelligence, Coronation Research, Chinwe Egwim, noted that although the projected global GDP growth and expectations of a gradual decline in average global inflation, paints a cautiously optimistic picture for Nigeria’s macroeconomic path, the FG must work with other sectors of the economy to adopt a comprehensive approach to balancing short- term imperatives with long-term sustainability goals.

Egwim mentioned that prudent fiscal management, strategic infrastructure investments and targeted interventions to address inflationary pressures and trade imbalances are paramount to ensuring macroeconomic stability and resilience.

Whilst commending the CBN forays under the Cardoso, she said that monetary policy is poised to tighten and liquidity constraints in the foreign exchange market are projected to persist, posing challenges amid weak supply versus high demand dynamics.

“From our vantage point, the interventions would contribute to stabilizing the FX market by mitigating excessive volatility, thereby instilling confidence among market participants. This stability is crucial for maintaining macroeconomic equilibrium and facilitating sustainable economic growth. Considering our 2024 projections, Nigeria’s GDP growth is expected to modestly improve to three per cent y/y, albeit below the population growth rate, indicating a potential weak transmission effect on the real economy. However, these projections underscore the importance of strategic planning to navigate potential uncertainties and downside risks, ensuring resilience and stability amidst evolving macroeconomic dynamics,” Egwim said.


Despite the challenges posed by soaring inflation rates, Nigeria has in times past, demonstrated resilience through adaptive strategies, investment in innovation and infrastructure and fostering a conducive business environment. By embracing these principles and pushing through adversity, Nigeria can navigate its economic challenges and emerge stronger and more resilient in the long run.