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By Merit Ibe
The Centre for the Promotion of Private Enterprise (CPPE) has projected that inflation may moderate slightly on the expected reduction of the volatility of the exchange rate and possible rebound of the naira.
The Centre also forecasted moderation in energy cost as the geopolitical tension eases as a result of the impact of Donald Trump’ presidency.
Director of the centre, Dr Muda Yusuf made the projections in the 2024 Economic review and 2025 outlook, where he noted that despite the intense macroeconomic headwinds in 2024, the Nigerian economy exhibited resilience on account of GDP performance.
“The GDP grew at 2.98% in the first quarter, 3.19% in the second quarter and 3.46% in the third quarter. It may close the year at about 3.6%. This is at par with IMF forecasts for GDP growth for the sub-Sahara Africa which is 3.6% and better than global GDP forecast of 3.2%.” On the sectoral growth disparities, Yusuf viewed that the service sector continued to dominate the sectoral growth performance for most part of the year.
“In Q3 2024, the financial services sector outperformed other sectors with a growth performance of 32%. Insurance grew by 19.8%, road transport grew by 17.9% and rail transportation 19.7%.
However, real sector growth remained subdued during the year with agriculture posting a GDP growth of 1.14% and manufacturing, 0.92% in the third quarter of 2024. Air Transport, Quary & Minerals, Petroleum Refining and Textile sector remained in recession as at third quarter of 2024.”
He noted that the implication is that sectors with high job creation potentials and prospects for economic inclusion were still struggling, adding that this situation needs to be reversed to fix the current high unemployment and reduce poverty.
Yusuf also pointed out that there is a likely boost in global oil production as USA increases production and the embargo Russia eases, noting that there is also the factor of the base effect on the inflation numbers as inflation was generally elevated in 2024.
He said the following key drivers of inflation may not completely dissipate in 2025:which include high energy cost including electricity tariff; exchange rate: transportation cost; high Interest rate; high cargo clearing cost; impact of insecurity on agricultural output and food supply climate change and flooding, among others.
Given the current disposition of the central bank of Nigeria, the CPPE boss said the monetary conditions may remain tight in 2025, adding that the degree of tightening may decelerate in 2025 given the current high levels of MPR and CRR. He advised that government should expedite action to boost capitalization of the development finance institutions – BOI, BOA, NEXIM to deepen development finance interventions. He emphasized the need to revitalize and restructure the Bank of Agriculture to support the agricultural sector and agro-allied industries with the much-needed concessionary financing.
“Current high interest rate in the commercial banks continues to impede the recovery and growth of the Nigerian agricultural and agro-allied sectors of the economy. The CBN should soften its tightening stance in order to support investment growth and job creation in the economy.
“Current high interest regime foisted by the tightening regime increases the risk of loan defaults, increasing the prospects of higher non-performing loans in the financial sector.
“High interest rate also increases debt service cost for government with the current huge exposure to domestic debts.
“High interest rates typically pose significant risks to business sustainability amidst numerous headwinds.
There is a need to protect the real economy from the adverse consequences of free market principles. This is the basis of government intervention in a market economy.
On key business risks in 2025, Yusuf said
businesses would therefore need to calibrate their strategies according to the level of exposure to these risks which include Forex Volatility Risk,, Interest Rate Risk, Inflation Risk, Financial And Monetary Policy Risk, Regulatory Risk, Cybersecurity risk, Insecurity Risk
Political Risk, Corruption Risk, especially with regard to public sector transactions and contracts;
Environmental /Climate Change Risk.
