Nigeria Macroeconomic Outlook
2025
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Money supply growth may surge to 5.7% in 2025, potentially overstimulating the economy if productivity remains static. Interest rates could be cut by 50-100 basis points, and foreign exchange may stay volatile, with the naira trading between ₦1930-2000/US$ due to weak export revenues and investment inflows. PMS prices are likely to average at ₦1500/liter amid persistent price increases.
Inflation may climb to 37.16% in 2025, up from 32.77% in 2024
Money supply growth is projected to slow to 1.5% in 2025, a positive shift from 3.4% in 2024. Interest rates could see a slight increase of 25–50 basis points in H1, followed by a reduction of the same amount in H2. Stronger foreign exchange inflows are expected, supporting the naira, which may trade around ₦1370/US$. PMS prices may stabilize at ₦1100/liter due to consistent supply and a stronger naira.
Inflation is expected to decrease to 31.81% in 2025, down from the estimated 32.77% in 2024.
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The government should apply key reforms, including those proposed by the existing presidential tax reform committee. Core goals should include broadening the tax base, increasing the incorporation of the informal sector through tax digitalization, and renegotiating Nigeria’s existing debt stock.
The CBN’s continued focus on increasing the monetary policy rate (MPR) should be complemented by supply-side strategies aimed at boosting productivity in core sectors while the Cash Reserve Requirement (CRR) should be linked to the Loan Deposit Ratio (LDR) where CRR to banks by the CBN is allocated based on loan book performance; the higher the LDR of a bank, the lower the CRR. This multi-pronged approach would help ease inflationary pressures while also increasing access to credit from the financial system to the real sector of the economy.
The government should develop the underlying regulatory regime as well as ensure the enforcement of current provisions. Specifically, the federal government should engender greater transparency and efficiency in the activities of regulators in the petroleum industry, with clear procedures, requirements, and timelines.
Beyond the provision of financing, the federal and state governments must ensure the provision of complementary services aimed at growing the non-oil sector. These include robust quality assurance and testing infrastructure, increased investment in affordable energy for manufacturing companies, improvement in transport & storage infrastructure, and well-designed export promotion activities in key target markets.
The national government and subnational governments must urgently tackle the rising spate of insecurity that threatens the oil and non-oil sectors of the economy. The government must improve resource allocation to security agencies, intelligence gathering, and other non-kinetic strategies aimed at tackling worsening insecurity.
Increased and prudent use of pension funds and other related capital sources could unlock access to financing for infrastructure and other critical projects while helping to manage Nigeria’s debt stock and enhancing transparency in the pension industry. State governments deploying municipal bonds backed by state assets and tax receipts could draw key financing for infrastructure like roads, sewerage systems, power plants, power transmission lines, smart grid systems for state electricity markets, and secondary healthcare facilities while offering attractive yields to institutional and retail investors.
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