Tony Chukwunyem 
The Central Bank of Nigeria (CBN) has said that the removal of fuel subsidy, lower crude oil earnings, rising import bills and increased external debt servicing obligations could negatively affect accretion to the country’s external reserves.
The apex bank disclosed this in its Monetary, Credit, Foreign Trade and Exchange Policy guidelines for fiscal years 2024/2025, posted on its website yesterday.
It stated: “The outlook for Nigeria’s external sector in 2024/2025 is optimistic, on the expectation of favorable terms of trade, occasioned by sustained rally in crude oil prices and an improvement in domestic crude oil production.
The positive outlook is supported by the sustenance of crude oil price, propelled by the decision to cut production, and gains from capital flows and remittances.
“However, lower crude oil earnings, fuel subsidy removal, rising import bills and increased external debt servicing obligations could pose downside risks for the accretion to external reserves. In addition, the sustained monetary policy tightening by central banks across advanced economies increases the risk of capital outflow.”
In addition, the CBN said the country’s output growth was likely to maintain a positive trajectory in 2024/2025, adding, however, that “the growth prospects are dependent on continued policy support in the agriculture and oil sectors, reforms in the foreign exchange market, and the effective implementation of the Finance Act 2023 and the 2022-2025 Medium-Term National Development Plan (MTNDP).”
While noting that the risk to the outlook “is still tilted to the downside, characterised by significant headwinds such as rising energy prices emanating from lingering effects of the Russia-Ukraine war, and the persisting security and infrastructural challenges, which could undermine the growth outlook in the short to medium term,” the CBN said “domestic prices are expected to remain elevated through 2024/2025, on the back of spillovers from global supply constraints, and exchange rate pass-through. More so, the persisting security and infrastructural challenges could exacerbate inflationary pressures.”
Furthermore, the regulator said it expects the performance of the fiscal sector to remain on a positive recovery trajectory in 2024/2025, adding that “this outlook is contingent on the effective implementation of the Finance Act 2023 and restructuring of key revenue generating MDAs to boost non-oil revenue.”
It also stated that “low domestic crude oil production, growing public debt, lingering insecurity, global economic slowdown, and the Russia-Ukraine war, could pose significant downside risks to fiscal operations in the short- to medium-term.”
