Financial expert and Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, expressed skepticism about the feasibility of President Bola Tinubu’s administration achieving a $1 trillion economy in the next eight years, characterizing it as increasingly resembling a pipe dream.
He made the statement during the Parthians Partners 2024 Outlook breakfast session held in Lagos, where he pointed out that despite the depreciation of the naira, market analysis indicated that the country’s currency was undervalued by 31.43 percent on the parallel market, suggesting a true value of N800.19/$.
Additionally, he made a forecast that with the implementation of appropriate policies, the naira would strengthen and stabilize in 2024.
In reference to the 2024 appropriation bill and the federal government’s ambitious goal of achieving a $1 trillion economy in eight years, Rewane commented, “Oil price is about $76 per barrel today, the price per barrel is at $74 per barrel.
“Normally, your benchmark price should be around 20 per cent below the spot price and now we are already under. Not only that, the production the president announced was a target of 1.7 million to 1.8 million barrels per day and, then, 24 hours later OPEC cuts your quota to 1.5 million per day and revenue is price and quantity.
“So, on the price side, you are under, as well as the quantity. So the goal of achieving a $1 trillion economy in eight years is becoming more of a pipe dream.”
Commenting on the currency, Rewane said, “When you divide the price of goods in Nigeria and the price of goods in New York, you will get about N800 to a dollar. The official market is N806.73 and the parallel is now N1200/$1, so something is happening as the currency is undervalued at 31.43 per cent. How do we correct this undervaluation?
“You have to correct it by changing the market structure and allowing the wholesale option to take place where the central bank can participate. When that happens, the market would begin to stabilise.
“We believe that the currency will begin to appreciate sometime going into 2024. The currency will stabilise.”
Rewane predicted an upcoming phase of heightened inflation in early 2024, citing ongoing market reforms and continued volatility in the parallel market for currency. Nevertheless, he anticipated a shift towards moderation by mid-year, predicting that the average inflation rate would stabilize at 23.6 percent in 2024, a slight improvement from the 24.4 percent recorded in 2023.
Highlighting the potential for a decline in inflation, Rewane emphasized that this could prompt a natural appreciation of the exchange rate. In this context, he expressed confidence that President Tinubu’s target of reducing inflation to 21.7 percent is attainable.
Rewane added, “Inflation will continue to rise in early 2024 due to market reforms and persistent currency volatility on the black market. However, base effects are expected to kick in by mid-year with inflation moderating to an average of 23.6 per cent in 2024 from an average of 24.4 percent in 2023, and once inflation begins to decline, the exchange rate would appreciate naturally.
“Tinubu said he is going to get it down to 21.7 per cent, we would look and see how, but we think that would happen.”