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2024 will hardly be defined by black swan events. The major occurrences that will impact political economies, markets, and the well-being of the people during the year are predictable. They will be known knowns (the things we know we know), as opposed to known unknowns (the things we know we don’t know) or unknown unknowns (the things we don’t know we don’t know), as former US Defence Secretary Donald Rumsfeld once described the three concepts apart.

The fate of the world is more or less sealed in 2024. This is because we didn’t do enough in the preceding years to have different collective realities this year. The world is entering a turbulent and subpar year as a result of the trends in global geopolitics and the governance of local economies that wittingly or inadvertently induced these trends.

Global geopolitics has continued to be marked by competition and insubstantial cooperation. This is in spite of the need for effective collaborations to address global challenges, the top three being soft economic growth, insecurity, and climate change. The world has seemingly become accustomed to these crises, which are fuelled within national economies, while the political leaders come together at international fora to pretend that they urgently want to solve the problems even though they consider these problems to be serving their interests.

According to the October 2023 forecast by the International Monetary Fund (IMF), global output growth will be weakest in 2024, at 2.9%, compared to 2022 (3.5%) and 2023 (3.0%). The global economic weakness is stretching into multiple years after the Covid-19 pandemic. Granted, this was in part due to the use of contractionary monetary policy to reverse the uptrend in inflation in advanced economies. But to counteract the effect of the policy on the world economy, increased financing ought to have been deployed to emerging markets (EMs) and developing economies that are structurally able to leverage investments in the real economy to raise global output growth. But there is no ‘world economy’ except by the summing up of the world’s economies. National economic thinking has continued to hold sway, harming global growth.

2023 ended with two major wars: the Russia-Ukraine war and Israel’s war with Hamas, which has visited human catastrophe on Gaza, Palestine. Both wars have enjoyed enough support to keep them going, despite their potentials to plunge the world into broader conflicts. As it were, the world is putting up with conflicts, and this can only encourage insecurity around the world.

The climate crisis is also not going away. Rather, it is intensifying. 2023 was the hottest year on record. According to the European Union’s Copernicus Climate Change Service, global temperature by the end of last year was going to be more than 1.4 degrees Celsius warmer than pre-industrial levels. But beyond 1.5-degree-Celsius warming above pre-industrial average, scientists say human beings and ecosystems will struggle to adapt. Yet, it has been more talks and pledges and less concrete actions since the Paris climate agreement was reached in 2015.

We now examine how these trends will shape the Nigerian and global outlook in 2024.

Powerful president, weak governance

After a shaky climb to power in 2023, President Bola Ahmed Tinubu has become the most powerful political leader in Nigeria today. Five days after he left Abuja to celebrate the yuletide season in his Lagos home, the Vice President, Kashim Shettima, and members of the Governors Forum, a club of the governors of the 36 states of the federation, paid Tinubu a courtesy visit. It was a show of the control of the political lever by Tinubu, who has been described as the first politician to have become the President of Nigeria since 1999.

But as the President was preparing for a grandiose demonstration of his hold on power, several villages across two local government areas of Plateau State were being overrun by Islamist terrorists. Over 200 fellow citizens, including women and children, were mowed down across 17 communities, as though all Nigerian state security operatives were also on vacation like the Commander-in-Chief was. As typically is the case, the attackers had all the time they needed to carry out their murderous and arsonist attacks. The gaiety at the meeting of the governors with the president two days after the gruesome attacks on Christian communities showed that political power in Nigeria often means nothing for the protection of poor and vulnerable citizens.

The attacks in Plateau were predictable. In several attacks by Islamist militants, over 52,000 Christians have been massacred over the last 14 years, according to a new report published by the International Society for Civil Liberties and Rule of Law (Intersociety). This and other forms of insecurity have festered across the country as they are either politicised or met with inadequate security response. Except President Tinubu changes from his gaudy style and makes determined efforts to succeed where his predecessors failed, criminal actors will continue to rule the roost, carrying out attacks against suspecting but powerless victims.

The President also needs to genuinely commit to revamping the economy. So far, his commitment to improving the economy has been characterised by superficial reform, while curiously keeping silent on restructuring the political economy as he had canvassed for years before coming into office. By ‘ending’ petrol subsidy and introducing market exchange rate, government revenue has increased in naira terms, while economic production and welfare of the people have taken unfortunate, downward turns. The major instrument for effecting change in the macroeconomy this year – the 2024 budget – has all the characteristics of the previous budgets: frivolous spending on the few elected public officials and their appointees, lack of clear-cut direction for economic renewal, and weak social spending.

Whether political or military or a combination of both, the government needs to find effective solutions for securing lives and property in the country. It needs to reverse the uptrend in poverty by setting ambitious economic goals to be assiduously pursued over the coming years. This entails working with the private sector in an economic war room to map out strategies, assign responsibilities, establish frameworks for measuring progress, and strengthen reform programmes.

Monetary strategy or uncertainty

Since his appointment as the Governor of the Central Bank of Nigeria (CBN) mid last September, Mr. Olayemi Cardoso has come across as someone who does not act hastily or does something so as not to be seen to be doing nothing. The routine Monetary Policy Meetings (MPC) slated for September and November did not hold. Those meetings could have held, with the governor influencing “hold” decisions to maintain the status quo in monetary policy.

However, maintaining the status quo by action or inaction is anything but what the economy needs. Inflation has continued to rise. The value of the naira has maintained downward volatility. Economic growth remains tepid. And unemployment has continued to worsen. In all the areas the CBN has been mandated to foster economic stability and progress, the opposite has been the reality.

In 2024, the CBN will be closely watched. The determination would be made whether the stay of action that has characterised monetary policymaking was strategic, or the leadership of the bank is simply wary. Clarity would be needed on the hint Mr. Cardoso dropped on the recapitalisation of the banks. His predecessor had included an increase in bank’s regulatory capital as a part of his agenda when he was reappointed into office in 2019. Yet, the agenda did not move forward, in contradistinction to a similar policy that was announced with a bang in 2004, when banks’ regulatory capital was raised by a whopping 900 percent, from N2.5 billion to N25 billion, and the banks had 18 months to comply.

The explanation that has been given as to why the banks must increase their capital base, which is the acute depreciation in the value of the naira, by over 670% since 2004, is not entirely convincing. It runs counter to the official anti-dollarisation of the economy. And just like the 2004 programme forced the consolidation of marginal banks, it is suspected the same objective may be woven into the impending exercise. But such iteration at a time of economic slowdown, compared with the expansive outlook 20 years ago, would cause worries, including potential large-scale erasure of jobs in the banking sector amid already high unemployment rate and investor apathy towards the country.

Other issues that will continue to cause Nigerians to grumble about the management of the economy is the scarcity of the naira. Like many of the economic challenges of the country, which don’t go away once they surface, the scarcity of the local currency has become an awkward fixture of the economy. Nigerians are unable to access cash from their bank accounts. This is having a big impact in the informal economy, given that only 64% of adult Nigerians had access to formal financial services in 2023.

Will the CBN be able to address these challenges in 2024 and utilise its policy tools effectively? The answer is up in the air.

From boosting global growth to dragging it

According to World Economics, China's Compound Annual Growth Rates (CAGR) over the last 10, 5, and 3 years were 8.0%, 4.2%, and 3.2%, respectively. The projection of the IMF is that China’s output growth in 2024 will fall to 4.2% from 5.0% in 2023. From boosting global economic growth for over a decade before the Covid-19 pandemic, China’s growth has become underwhelming and has been characterised by the IMF as a “drag” on global output.

The decades-long high economic growth of China had served the world’s economies well. It fuelled demand and the prices of commodities, benefiting many African producers. China also provided cheap labour, technical knowhow, and robust supply chains to support global trade and consumption. Its diminished growth outlook was inevitable as the economy starts to mature after towering to become the world’s second-largest by nominal GDP. Nevertheless, slower growth in China will send negative shockwaves through the global economy, especially the developing regions, including Africa.

The role of China in the world’s economy is also going through a momentous change. From being a net recipient of foreign aid decades ago, China rose to become a major provider of development and infrastructure financing in developing countries. The financing has now become a huge part of the public debt burden of those countries, with China being called upon to provide adequate relief to the poor countries that are indebted to it. According to AidData, developing countries owe China at least $1.1 trillion. While China continues to express willingness to provide debt relief, it has slowed down on its financing for infrastructure projects in other developing countries. The financing gaps in these countries will only grow in 2024 as the international capital market controlled by China’s rival Western creditors has continued to withhold financing from poor countries because of their high-risk perception.

China will also remain relevant to the ongoing economic transition, not only in the energy market but also in technology in the era of the Fourth Industrial Revolution. If the world would make progress with decarbonisation, China would have a big influence on that. Already, it is a global leader in renewable energy. But China also remains the world’s largest emitter of carbon dioxide, which is contributing to global warning.

And, in the rhetorical sphere, China is likely to make a stronger comeback to global geopolitics in 2024 – an election year in the United States. Former US President Donald Trump, who enacted trade war between the two countries while in office between 2016 and 2020, has a strong chance for re-election, except he is effectively barred from participating under the insurrection clause of the 14th Amendment of the US constitution. According to Brookings Institution, US-China trade tensions under President Trump negatively affected consumers as well as many producers in both countries. Such hostilities may build up again in 2024.

When action begets stronger reaction

On 7 October 2023, Hamas, the Palestinian political and military organisation governing the Gaza Strip of the Palestinian territories, made a surprise attack inside Israel. The attackers targeted civilians, killed over 1,200 of them and took 240 others hostage. What has followed is a heavy-handed response from Israel. Gaza's Health Ministry said it has documented over 20,000 deaths, and more than 50,000 wounded, in what is now a continuing Israel-Hamas war.

Israel’s use of imprecise bombs – the so-called ‘dumb bombs’ – has resulted in high civilian causalities, including UN aid workers providing humanitarian assistance in Gaza. Despite appeal by US President Joe Biden for Israel to limit civilian deaths while going after Hamas fighters, Israeli President Benjamin Netanyahu seems to have hardened his position, using ‘disproportionate force’ in a determination to ‘obliterate’ Hamas.

Israel’s heavy-handedness could put it at risk over the longer-term and jeopardise the Middle East peace process. Experts believe the counteroffensive means the proposed two-state solution between Israel and Palestine is dead. It is also a setback to the efforts at normalisation of diplomatic relations between Israel and many of its Arab neighbours. A fallout of the conflict has been attacks by Yemen's Iran-backed Houthi militants targeting vessels they believe are linked to Israel travelling in the Red Sea. In response to the threat, major global shipping companies, such as Maersk, have had to abandon the waterway. The US mustered a coalition with its Western allies to secure the channel, but Spain and France were soon to withdraw from the security arrangement.

President Netanyahu has said the war will continue for months, raising the spectre of conflict and insecurity in the new year in one of the world’s most volatile regions.   

Tough oil diplomacy

Data from Statista shows the average price of Brent crude oil stood at $82.59 per barrel (pb) as of October 2023. But the year closed with the oil futures trading at circa $77 pb. According to a report monitored on Reuters, the Organisation of the Petroleum Exporting Countries (OPEC) faces a grim oil market outlook in 2024. With the oil cartel facing a declining demand and shrinking market share, its membership is also set to further deplete.

Angola said it is leaving the organisation from this January, following exits by Ecuador in 2020, Qatar in 2019, and Indonesia in 2016. Angola's departure will leave the group with 12 members and take its crude oil production to below 27 million barrels per day (bpd), which is less than 27% of the total global supply of 102 million bpd, as per the report by Reuters. This leaves OPEC in a quandary. To fight for increased market share, it would have to stall further production cuts, which means accepting low prices – except there is an uptick in global demand.

Last November, Saudi Arabia managed to bring together OPEC and some non-member producers, known as OPEC+, under a voluntary agreement to extend supply cut. Russia agreed to increase its supply cut throughout Q1 2024. Difficult as it was to hammer the agreement, its voluntary nature means members can act otherwise. The pressure to do so is high among African producers who are grappling with a tight fiscal space, especially on account of high debt service costs. Angola served its notice to quit the cartel after it failed to obtain approval to supply 1.18 million bpd after OPEC+ lowered its output to 1.1 million in November.

Meanwhile, US oil production increased to 13.2 million bpd last October, up by approximately 900,000 bpd compared to a year earlier. This is helping to blunt out any concern about global oil supply as a result of the war in the Middle East. Although US production dropped towards the end of last year, the oil market still faces downward price pressure due to excessive production capacity relative to demand, and because of the conflicting interests of the major producers.  

"Increased supply by some producers outside of the OPEC+ coalition, along with doubts in the global economy and on the global market's prospects as well as oil market brokers' actions are all warning signs for the stability of the oil market," Iranian oil minister, Javad Owji, said after the group’s meeting last November.

Rule of law under test in the US

As noted earlier, 2024 is an election year in the United States. The winner of the presidential election, as usual, would be determined by the voters who cast their ballots. This tradition in US’ democracy had faced no significant questioning until the 2020 presidential election in which the then-incumbent President Donald Trump lost and refused to accept that he did so fair and square. His denialism culminated in the insurrection against the country’s law and authority on 6 January 2021. For his alleged role in the acts of insurrection that day, Colorado and Maine – two of the 50 states of the federal union – have said Trump should be removed from the ballot in their states (with the decision in Colorado subject to a ruling by the Supreme Court).

At its face value, Trump is believed to have violated the 14th Amendment of the US constitution when he seemingly incited protesters to storm the Capitol to disrupt the official certification of the presidential election by the Congress. Therefore, the 2024 presidential election, which is expected to be keenly contested by the former president and the incumbent President Joe Biden, may be preceded by legal determination of the eligibility of Trump.

As a rule-of-law state, the US is expected to mete out the legal punishment against Trump if it is proven through the legal process that he committed an act of insurrection (also if an “insurrectionist ban” extends to a President). However, the main argument has been that Trump’s electability should be decided by the voters in keeping up with the country’s democratic tradition. This argument tends to split the US democracy from one of its cornerstone principles – adherence to the rule of law.

It is a dilemma of historic proportion as never has a US former President who had allegedly committed insurrection presented himself for re-election. Extreme caution is being exercised in recognition of the status of Trump and his large support base – part of which is wild as witnessed on 6 January 2021.

The 2024 presidential race puts the US in an uncharted territory, but one that the country has been courting for decades through extreme partisan polarisation. Whether or not Trump makes it to the ballot in November, this electoral cycle will challenge the country like no other. If Trump becomes the candidate of the Republican Party, it would be another consequential endorsement of unhinged presidential behaviours by a major political party in the country, and the legitimacy of the election will rest squarely on Trump winning as he and his ardent supporters would see it.

The US is concerned about how the rest of the world would view it as an enduring – and not as a weakening – democracy. But if such consideration makes it to gloss over the legal jeopardy that Trump should legitimately face, an untoward message would nevertheless be sent to the world. Authoritarian leaders would be emboldened to use Trump’s stratagems that ride on his moral frailties and lack of accountability to seize and maintain a stranglehold on power.

Policy to upset financial markets

The monetary tightening of the US Federal Reserve, which began in early 2022 in response to rising inflation, has come to an end. Fed’s policymakers see three interest rate cuts coming in 2024, starting from as early as March. By year-end, the Federal Fund Rate is expected to have fallen by 75 basis points, from the current 5.25%-5.5% to 4.5%-4.75%.

As part of their wild reactions, markets are pricing in up to six quarter-point rate cuts, amounting to 150 basis points. The expectation of the rate cuts caused significant US stock market rally in December. The Nasdaq advanced more than 44% in 2023. The S&P 500 gained more than 24%, and Dow 30 was up by 14%.

According to Bloomberg, emerging markets closed out 2023 with standout returns as bets on bigger and faster US interest-rate cuts propelled a blistering late-year rally across the developing world. EM currencies, equities, and bonds all advanced in 2023, and more gains are expected in 2024 as the US dollar, US yields are seen falling. The US dollar ended its two-year streak of gains, closing 2023 with a loss against a basket of currencies on the expectations of interest rate cuts by the Fed.

The see-saw in markets will continue in 2024. Monetary policy change towards tightening had sparked capital flow to the US through the treasury instruments. Now with a reversal of the policy, emerging markets and developing countries are set to benefit as investors look for higher yields in these markets.

But these calculations could play out in a less traditional way. Investors are likely to be concerned about the impact of public debt in developing countries and the weak trend growth rates in the world’s economies. Also, many developing economies, including Nigeria, who have hiked interest rates in tow with the US, still have elevated inflation rates. They run the risk of economic, financial, and even social instability if they don’t find the scope to bring down inflation, avoiding holding interest rates high to attract hot monies in their securities markets.

Intra-Africa trade: From talks to progress

The African Export-Import Bank (Afreximbank) has become perhaps the most relevant multilateral development bank (MDB) operating in Africa by connecting the most impactful policy framework for the continent – African Continental Free Trade Area (AfCFTA) – to the market. The third edition of its flagship programme, Intra-African Trade Fair (IATF), held between 9-15 November 2023, in Cairo, Egypt, in collaboration with the African Union and AfCFTA Secretariat. IATF 2023 projected $43 billion in trade and investment deals; 35,000 conference delegates, trade visitors, and media; 75+ exhibiting countries; and 1,600+ exhibitors. While awaiting the actual data generated, the event was undoubtedly a success.

Trade in goods produced by African countries within the continent, or intra-African trade, constitutes only 16% of total African trade. According to Afreximbank, one of the reasons for this low regional trade is lack of access to trade and market information. The bank said it decided to convene the IATF every two years to bridge this gap by directly connecting buyers and sellers from across the continent.

A significant increase in intra-African trade is imperative for the economic development of Africa. The continent’s low internal trade is an anomaly compared to other regions. In 2022, most member states of the European Union had a share of intra-EU exports between 50% and 75%. In 2021, intra-regional trade made up about 40 percent of Asia’s total trade. According to the World Bank, trade is an engine of growth that creates better jobs, reduces poverty, and increases economic opportunity.

However, African countries face many other challenges to increasing intra-regional trade on the continent than simply connecting buyers and sellers. One of such challenges is financing, both for direct production and infrastructure to support economic growth. Many African economies are still being mismanaged by incompetent and corrupt leaders, making economic transformation merely a buzzword. In these countries, the private sectors are underperforming because of the unfriendly business environment.

The foregoing raises the question of whether more efforts are needed at the national level than the supra-national level in addressing the challenges of Africa’s economic development and transformation, for improved intra-regional trade. The African continental trade initiative is in order. It finds its models in other regions of the world. But such initiative should leverage national appetites for development to advance intra-regional trade.

2024 is the fourth year since AfCFTA was operationally launched. Its membership growth to 47 African Union member states is one of its successes. However, its ultimate success would be determined by improved trade statistics, which it must begin to shift in favour of the continent after its first three years of operations.

Climate risk intensifies as it’s trifled with

Last October, a coalition of international climate scientists wrote in their report published in the journal BioScience that life on earth is under “existential threat.” This was as 2023 was on course to become the hottest year on record. Climate data has now confirmed that last year was indeed the warmest in history. Scientists said global average temperature rise reached 1.4 degrees Celsius above pre-industrial levels during the year. With six years to 2030, when scientists warn the rise in global temperatures must not exceed 1.5 degrees Celsius, the world is on the verge of exceeding the threshold beyond which humans and ecosystems may not be able to adapt.

In 2023, regions across the world witnessed deadly heat waves. Others faced devasting floods, while some experienced both in quick succession.

"The truth is that we are shocked by the ferocity of the extreme weather events in 2023. We are afraid of the uncharted territory that we have now entered," wrote the authors of the new report. They said the world has made only minimal progress on the climate, adding that "We must shift our perspective on the climate emergency from being just an isolated environmental issue to a systemic, existential threat."

Nevertheless, the main climate summit for the year, COP28, which held in December in the United Arab Emirates, ended with more verbiage as opposed to definite, or even quick-fix solutions. The conference, which extravagantly gathered assortments of attendees, has as a notable point of its final agreement: “transition away from fossil fuels in energy systems, in a just, orderly, and equitable manner, accelerating action in this critical decade, to achieve net zero by 2050 in keeping with the science.”

Commitment to addressing the climate emergency is hindered by the lack of willingness of countries to relinquish their current economic advantages to safeguard a liveable future. Only when there is such commitment can progress be accelerated. We have seen homes, livelihoods, and even lives being swept away by extreme climate events. The prognosis is that such events are going to continue with higher intensity, regularity, and coverage. Making a slow transition to low-carbon economy has become more and more unsafe for the environment, the economy, and the people.  

Conclusion

Political leaders, policymakers, market participants, and the people at large need to commit to a safer and more prosperous world. Lack of the required levels of commitment in the previous years will define the realities in 2024. The present may likely teach us to work towards a better future.
 
Jide Akintunde is Managing Editor, Financial Nigeria, and Director, Nigeria Development and Finance Forum.