The resilience of the Nigerian economy in the first half of 2024 is obvious. The economy recorded a growth rate of 2.98 per cent in the first quarter, up from 2.31 per cent during the same period last year.
As far as local and international experts are concerned, there is renewed optimism about Nigeria’s economic prospects despite ongoing challenges. The importance of continued cooperation from all stakeholders in overcoming these challenges and achieving robust and inclusive growth can therefore not be over-emphasised… The road to one trillion dollars looks long but the destination is worth it.
When President Bola Tinubu nominated Olayemi Cardoso as the governor of the Central Bank of Nigeria (CBN) on 15 September, 2023, those knowledgeable about the rot in the system and his pedigree were excited about the future of the country’s economy.
The hope of a better-run apex bank was renewed because he was not a nominee coming from nowhere. He had a long history of successes in banking, public policy and governance. He was a banker, chartered stockbroker and public policy expert, who had worked in the public, private and development sectors.
He was commissioner for Economic Planning and Budget in Lagos State, where his no-nonsense approach to public funds earned him the sobriquet, “Headmaster.”
He was once chairman of the board of the African Venture Philanthropy Alliance; and most recently, chairman of Citibank Nigeria Ltd. He is the founding chairman and co-chair of the Ehingbeti Summit, the Lagos State economic summit. He is also a member of the advisory board of Lagos Business School (LBS).
He therefore came on board with an impressive pedigree to tackle the rot in the banking system head-on.
Nine months down the line, it is not too early to start asking if the journey is going on as planned or not. Though the governor has a five-year mandate, yet close to a year is enough for him to start scoring himself and for the media to beam its searchlight on his conduct and activities as CBN boss.
Despite obvious challenges with inflationary pressures, which are affecting purchasing power, it is clear that a lot has happened since the assumption of office of the new leadership in CBN in October 2023. The management has concentrated a lot of time and energy on stabilising the economy, restoring confidence in the financial markets, and establishing a foundation for sustainable growth.
He is fighting inflation with passion and trying to stabilise the exchange rate. His policies are enhancing financial sector supervision, promoting financial inclusion, and increasing transparency in monetary policy decisions. We have therefore seen how the economy is responding to new measures from CBN.
The resilience of the Nigerian economy in the first half of 2024 is obvious. The economy recorded a growth rate of 2.98 per cent in the first quarter, up from 2.31 per cent during the same period last year.
The Services sector has been the main economic driver, contributing 58.04 per cent to GDP, with a growth rate of 4.32 per cent. The Industrial sector also showed improvement, achieving a growth rate of 2.19 per cent.
Talking about persistent inflationary pressures, with headline inflation rising from 29.90 per cent in January to 34.19 per cent in June, an objective analyst would observe that the pace of monthly increases has moderated, suggesting the effectiveness of the CBN’s anti-inflationary measures.
In the foreign exchange market, we have seen the significant narrowing of the gulf between the official and Bureau De Change (BDC) rates, indicating successful price discovery and reduced arbitrage opportunities.
The increase in external reserves is also notable. This is largely attributed to receipts from crude oil-related taxes and third-party payments.
Talking about the banking sector’s achievements, we have seen improvements in key indicators such as capital adequacy, liquidity, and non-performing loan ratios. The capital adequacy ratio remained strong at 12.2 per cent and the industry liquidity ratio increased to 46.2 per cent, while the non-performing loan ratio fell to 3.8 per cent, reflecting enhanced liquid assets and better risk asset quality.
To tackle domestic macroeconomic challenges and put the economy on this path of steady growth, the CBN’s team had raised the policy rate to 26.25 per cent, increased Cash Reserve Ratios, normalised Open Market Operations, and adopted Inflation Targeting as a new monetary policy framework.
As mentioned, in the foreign exchange market, the monetary bank had ensured a convergence of official and BDC rates, promoting transparency and reducing market distortions.
Governor Cardoso has in different fora emphasised that the ongoing recapitalisation efforts in the banking sector are focused on enhancing financial stability and driving progress toward reaching a $1 trillion economy by 2030.
Last Line
It is difficult if not impossible to repair in nine months the misadventures of previous years. The new helmsman knew ab initio that he had his job cut out for him and he set himself ready for the tough task ahead. Since there is a synergy between what Cardoso is doing on the monetary side and what the Presidential Villa and Ministry of Finance are doing on the fiscal side, the economy is responding well to the far-reaching reforms.
But no pain, no gain…. In fact, no patience, no gain. It will take time for Nigerians to fully feel the impact of the fundamental changes the government is making. It is however clear to the discerning that the economy is steadily on an upward trajectory.
As far as local and international experts are concerned, there is renewed optimism about Nigeria’s economic prospects despite ongoing challenges. The importance of continued cooperation from all stakeholders in overcoming these challenges and achieving robust and inclusive growth can therefore not be over-emphasised.
The road to one trillion dollars looks long but the destination is worth it.
Abdulrahman Abdulraheem is the author of eNaira Revolution: A Peep into Nigeria’s Cashless Future.
