2024 Wrapped

In a nice little bow 🎁

First of all, Merry Christmas, 🎄🎄

2024 has been a year to remember, marked by sweeping economic reforms and their far-reaching effects, pivotal elections, conflicts, and the remarkable resilience of the global populace. Here is our attempt to recap this eventful year.

Macroeconomy

This year saw the CBN adhere to its orthodox monetary policy stance. The Bank raised interest rates by 850 basis points, from 18.75 percent to 27.75 percent. Furthermore, the CBN employed a combination of policy measures and technology to address distortions in Nigeria's monetary landscape. Beyond the rate increases, the Bank introduced a variety of regulatory directives to sanitize the Nigerian foreign exchange market, most notably the introduction of the Electronic Foreign Exchange Trading Platform. The recapitalization of banks also occurred this year, and the drive is expected to continue into 2025 as more banks raise capital through various avenues.

One notable development this year was the increased coordination between fiscal and monetary policy. The Federal Government’s Eurobond issuance was more coordinated, with the CBN fully involved. The sustained removal of the fuel subsidy and, more recently, the introduction of a new tax bill aim to improve tax collection efficiency and promote economic growth. The President has reaffirmed his commitment to these reforms; however, questions remain from a budgetary perspective. The recently proposed budget includes a debt servicing allocation of about 16 trillion Naira, accounting for 45 percent of expected revenue, while infrastructure spending is projected at 14.85 trillion Naira.

The key challenge remains the lack of economic growth, which has limited the government’s revenue generation capacity. Looking ahead to 2025, the market transparency initiatives spearheaded by the CBN, combined with continued fiscal policy support, will be critical in attracting the investors needed to fill the investment gap faced by the Nigerian government.

Energy

Energy markets were a major talking point in 2024. The Ministry of Power's repricing of electricity led to a significant increase in consumers' power bills. This decision ensured electricity companies could adequately cover their production costs, enabling them to invest in improving power generation and reliability.

On the fuel and petroleum front, the Dangote refinery finally became operational, though not without significant political drama. The refinery has already impacted petrol prices in the country, but the full scope of its effects remains to be seen, particularly on fuel prices and foreign exchange. The refinery is expected to position Nigeria as a net exporter of finished petroleum products, a move that could transform the country's energy landscape.

Capital Markets

2024 was an exceptional year for the Nigerian capital markets. The NGX posted an impressive return of 35 percent, with most of the overall performance driven by a January rally in Dangote Cement. The rest of the year was characterized by sideways trading activity as investors shifted their focus to high-yield treasury bills and commercial papers, spurred by the higher interest rates discussed earlier.

However, oil and gas stocks on the exchange had a phenomenal year, delivering a remarkable return of 160 percent. This performance was largely driven by the resurgence of Oando’s share price and the successful listing of Aradel.

Venture Capital

Despite earlier predictions of a decline in venture capital interest in Africa during 2024, two unicorns emerged from the continent this year. Moniepoint and Tyme Bank, both well-established, profitable, and recognizable businesses, achieved unicorn status. This reinforces the observation that investors are increasingly focusing on pragmatic businesses with proven unit economics.

Additionally, startups demonstrated a growing embrace of domestic markets. Tizeti listed on the Nigerian Stock Exchange, while Payaza raised 50 billion Naira through a commercial paper issuance in the local market. These developments signal the maturing of Africa’s venture capital ecosystem and its increasing integration into domestic financial systems.

Elections

Over half of the democratic world went to the polls this year, marking the continued progress of democracy globally. Notable elections took place in the UK, US, Ghana, Botswana, South Africa, and Senegal. While each election had its nuances, the peaceful transitions of power across these nations underscored the resilience of democracy, particularly in West Africa, where the Ghanaian and Senegalese elections acted as a bulwark against the wave of military coups in the Sahel region.

One common theme across many of these elections was widespread dissatisfaction with the incumbent government's management of their economies. This places significant pressure on the newly elected leaders to address the economic challenges in their respective countries.