The Federal government may exceed its projected N6.04 trillion domestic borrowing to finance the 2024 budget due to the minimized use of the ways and means window.
Comercio Partners Limited, an investment banking firm, disclosed this during a media launch to present the firm’s Macroeconomic Outlook for 2024, themed, “Finding Rain in Drought”.
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, recently said that the apex bank will no longer give Ways and Means to the government until the previous loans are repaid.
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Under the previous administration, the then CBN governor, Godwin Emefiele, allegedly printed the sum of N22.7tn for former President Muhammadu Buhari under Ways and Means, which is the money that the CBN lends to the FG to finance shortfalls in its budget.
According to the report, the 2024 budget has a deficit of N9.05trn, down from N11.60trn the previous year. This deficit is expected to be funded through a combination of domestic borrowings of N6.04trn, foreign borrowings of N1.77trn, multilateral/bilateral loan drawdowns of N941.19bn and privatization proceeds of N298.49bn.
However, Comercio Partners in its report noted that it anticipates that the FG may surpass domestic borrowing estimates, especially as it seeks to minimize the use of the ways and means window.
“Furthermore, we anticipate that domestic borrowings may surpass estimates due to the minimized use of the ways and means window. Regarding foreign borrowings, the expectation is that global interest rates will remain prohibitively high in 2024FY, as market participants price in the possibility of rate cuts from the second half of the year. Consequently, we do not anticipate the federal government tapping into the Eurobond market in 2024,” it noted.
In its review of the Nigerian Stock Exchange, it noted that it expects a bullish start to the year fueled by investor anticipation of 2023 financial year results and dividend reinvestment
However, in the latter part of the year, it said market sentiments are likely to be shaped by a confluence of factors, including improved Foreign exchange conditions, the stance of the Monetary Policy Committee regarding inflation, yield movement in the fixed income market, and corporate disclosures.
“Regarding the sectoral outlook, we remain bullish on the banks owing to the high-interest rate environment and operational efficiency. In the Oil and gas sector, we anticipate continued revenue growth for oil marketers in 2024FY, primarily anchored by anticipated increases in product prices.
“Following the lifting of the FX ban on the 43 items in 2023, we foresee the influx of imports, intensifying competition and diluting demand for local players like OKOMUOIL and PRESCO. Cautious optimism characterizes our view on the Consumer Goods sector, with an expectation of sustained robust revenue growth in 2024FY, hindered however by inflationary pressures,” it said.
The report added that the outlook for forex remains intricate, shaped by a confluence of global economic shocks and domestic policy challenges.
While noting that the Naira may encounter volatility against major currencies in 2024, it said that a strategic and transparent management of FX reserves is imperative to instill confidence in the stability of the Naira and mitigate potential market uncertainties.
It said the anticipated commencement of operations at the Dangote Refinery is poised to mitigate Nigeria’s reliance on imported petroleum products, thereby fostering a more self-sufficient energy landscape
“With the 350 thousand bpd production expected at the Dangote refinery in H1 2024, Nigeria may not have to import these fuel categories again. Moreover, as the Dangote Refinery begins operations, there is a prospect for Nigeria to transition from a net importer of crude oil products to a net exporter. This transition could have far-reaching implications, positively influencing the country’s balance of trade and enhancing its overall economic standing on the global stage,” it said.
