CBN governor hints on reduction in price of petrol and inflation as Tinubu’s govt targets 77% increase in IGR

The governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Cardoso, has hinted on the reduction of fuel costs, saying inflationary pressures are expected to decline in 2024 due to the apex bank’s inflation-targeting policy.

He said this will have far-reaching implications across various sectors of the economy, noting, “We believe that the naira is currently undervalued”.

He also hinted that Nigerians will begin to see a reduction in the prices of petroleum products.

Cardoso stated these on Wednesday in his keynote address at the launch of the Nigerian Economic Summit Group’s (NESG) Macroeconomic Outlook for 2024 in Lagos.

He said, “I want to assure you that we are now at a turning point, and the bold reforms being undertaken across different segments of the economy, while initially challenging, are ultimately directed towards addressing these challenges in a sustainable manner.

“I am confident that we are already witnessing positive outcomes, and these will undoubtedly become more apparent shortly.

“The dedicated and relentless efforts being made are certain to bring about significant and positive changes for our economy.

“Indeed, recent reports from international rating agencies such as Fitch, Moody’s, and commendations from multilateral banks like the World Bank reflect this, with upgrades to Nigeria’s ratings from stable to positive”.

These reports, he said, acknowledge the possible reversal of the deterioration in the country’s fiscal and external position due to the authorities’ reform efforts. While noting the painful adjustments, he said, “They all identify a direction of travel that will unlock the much-needed growth and development for our economy in the medium to long term”.

He added that the anticipated moderation in pump prices of premium motor spirit (PMS), also known as petrol, due to the expected operational status of the country’s key government and privately-owned refineries in 2024 is a pivotal factor in the economic equation.

“The expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience”, he said.

He added, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent.

This will be aided by improved agricultural productivity and the easing of global supply chain pressures, benefiting businesses by boosting consumer confidence and purchasing power.

“The CBN’s adoption of the inflation-targeting framework involves clear communication, use of monetary policy instruments, and collaboration with fiscal authorities to achieve price stability, fostering market confidence and positively influencing consumer behaviour.

“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lowered policy rates, stimulating investment, fueling growth, and creating job opportunities.

The Central Bank of Nigeria (CBN) has returned to a conventional monetary policy approach focused on achieving price stability for sustainable economic growth, according to the CBN governor.

Initiatives in foreign exchange, such as the collaboration with the Ministry of Finance and the Nigerian National Petroleum Corporation Limited (NNPCL) to ensure FX inflows are returned to the central bank, are yielding positive results.

The expected stability in the foreign exchange market for 2024 is attributed to reduced petroleum product imports and the implementation of a market-determined exchange rate policy, aiming to streamline rates and enhance transparency.

The CBN governor expressed optimism about the nation’s economic trajectory, with projections for a real GDP growth of 3.76 percent in 2024, supported by improved crude oil prices and production.

The services sector is expected to dominate, driven by mobile money adoption, increased government partnerships, and expanded digital lending offerings, while the agriculture sector anticipates faster growth due to improved productivity and efficiency. The industry sector is tied to increased crude oil production, reflecting improved surveillance, infrastructure, and investments in the oil sector.

Meanwhile, the federal government is targeting a 77 per cent increase in Internally Generated Revenue (IGR) as it expresses hope that the newly integrated tax approach would help to achieve the self-imposed target of 18 per cent tax-to-GDP ratio from the current level of 10 per cent.

Minister of finance and coordinating minister of the economy Wale Edun said this in Abuja, at the opening of the 2024 Strategic Management Retreat of the Federal Inland Revenue Service (FIRS), yesterday.

“We are projecting a 77 per cent increase in IGR. Our revenue as a percentage of Gross Domestic Product (GDP) is low at below 10 per cent. It should be much higher.

“Government needs so much to spend on infrastructure and social services. The idea is to shift from expensive debts to domestic revenue mobilisation,” he said.

Edun premised the expectation on the newly restructured tax collection methodology of the Federal Inland Revenue Revenue (FIRS) which its chairman said was being tailored to specific taxpayer segments, with an aim to simplify the taxpayer experience. “No more complexities, no more overlaps—just a seamless and user-friendly interaction for every taxpayer,” Mr Zacch Adedeji had said while announcing the new decision in Abuja.

Commending the process at a two-day retreat for management of the FIRS, the finance minister said “We do have a tax policy, fiscal policy and tax reform committee and the commitment of that committee is that, together with the FIRS changes and improvements will be made to move the tax to GDP ratio to 18 per cent in the first place in the next couple of years and I’m sure you will not only achieve that target but that you will surpass it based on the strategies you are going to come up with here today.”

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