By Omoniyi Salaudeen
Both in his presentation of budget proposal and the New Year national broadcast, President Bola Ahmed Tinubu gave a comforting relief of an expected improved economy for the citizenry in 2025. “Nigeria’s economy is set to become more favourable for citizens in 2025,” he assured, projecting macroeconomic stability, a better business environment, employment opportunities and poverty reduction, among others.
During the presentation of the budget figure of N49.8 trillion (about $32 billion) to the joint session of the National Assembly, he outlined some positive results of the administration’s reform policies, indicating signs of a better economy.
“The reforms we have instituted are beginning to yield results. Nigerians will soon experience a better and more functional economy,” he stated.
Particularly excited by the latest reports of the National Bureau of Statistics, he cited the growth rate of 3.46 per cent in the third quarter (Q3) of 2024 as against 2.54 per cent in Q3 of 2023, increase in foreign reserves (42 billion dollars) as well as export trade surplus, standing at N5.8 trillion (about 3.7 billion dollars) as clear indicators of economic recovery.
“These clear indicators of gradual recovery, among others, reflect the resilience of our economy and the impact of deliberate policy choices we made from the outset,” he enthused.
Above all, with the measures enunciated in the appropriation bill, he said that it is the government aim to reduce inflation from its current rate of 34.6 per cent to 15 per cent, improve the foreign exchange rate from about N1,700 per U.S. dollar to N1,500, and assume a base crude oil production level of 2.06 million barrels per day.
As comforting as these premises are, some indices referred to as indicators of an improved economy are contrary to the IMF’s projection.
According to the institution’s prediction, the economic growth in 2025 will stand at 3.2 per cent while the reduction of inflation will remain as high as 25 per cent.
In its reactions at a forum, the IMF commended the Tinubu administration’s courageous reform policies, especially the fuel subsidy removal, which had brought untold hardship to the citizenry in 2024. Perhaps, inspired by the commendation, President Tinubu said that the ongoing economic reforms initiated 18 months ago would not be reversed, but strengthened to build on the progress made toward creating a more robust, equitable, predictable, and globally competitive economy.
Not many Nigerians are optimistic that the economy will bring significant relief this year, bearing in mind the challenges of insecurity, banditry, kidnapping, and ransom-taking and the attendant negative consequences on food production and inflation.
However, prominent economic and financial experts, who spoke with Sunday Sun in different interviews, expressed cautious optimism that the economy would perform better.
An erudite professor of Economics and former President of the CIBN, Segun Ajibola, in his perspective, gave a long list of things the government must do to achieve the objectives of the budget, especially the aspects that have to do with inflation, foreign exchange rate stability, food self-sufficiency, trade and industrial policies.
He said: “From all indications, the economy should perform better this year. Let’s look at two critical factors that have been on the front burner for quite some time now. Regarding subsidy, refineries are coming on one after the other. If the momentum is sustained, we should expect the price of fuel to come down significantly, given the competition that will ensue and the availability of the products locally to ward off the problem of exchange rates.
“As you know, that has linkages with so many sectors of the economy, including individuals, households, ,micro-businesses and small-scale businesses.
“The foreign exchange rate management is still neither here nor there. We had some stability towards the end of the year. Some attributed it to foreign currency inflows from Diasporans and the lenders to Nigeria. However, foreign currency inflow due to borrowing can give a false sense of security because it will add to your debt burden and you will also pay back in foreign currency. But the immediate impact of it is that it will shore up your foreign reserve. So, we still need to do a lot to stabilize that market in terms of managing our import dependency so that the country will not be vulnerable to whatever is happening outside the shores.
“A lot needs to be done in 2025 in managing dependency on foreign goods. We must ensure food self-sufficiency so that imported food will be limited. Medicals, plants, machinery and raw materials should also be sourced locally to reduce the pressure on the foreign exchange market. The government must also bring down the foreign exchange rate. As of today, in my own opinion, the naira is undervalued. We still need to see what we can do to deepen the contribution of the local environment to our needs so that exposure to the foreign exchange market will be limited and the country will not be vulnerable to what is happening outside the shores. As of today, Naira is undervalued. And it is because of the dependency of our consumption habits on foreign goods.
“In 2025, the budget proposal is projecting slightly over two million barrels per day of crude export at about $73 per barrel. There are so many occurrences in the global market that will determine that, but Nigeria can work on meeting the output target by managing the restiveness in the Niger Delta region and other areas.
“Overall, there are prospects of a better economy in 2025, but we need to work hard. Economic managers need not just to think out of the box, in some areas, they need to think without any box.”
Speaking on inflation reduction, Ajibola maintained that a 15 per cent inflation reduction is achievable, but the journey to achieving the target may not be an easy one.
He, therefore, suggested that focus should be more on fiscal policy rather than monetary measures which the CBN has been so much fixated on as a means of reducing inflation.
He said: “Whether a 15 per cent inflation reduction is achievable or not, the available statistics told us that there was a time when the inflation rate was about 73 per cent and gradually it was brought down to a single digit although not within one year.
“So, we can fight the inflation rate to something reasonable. But the journey to that projected figure may not be an easy one. Nigeria needs to have a complete reassessment of its monetary policies, which to me are not addressing the challenges.
“To me, fiscal policies are more of the problem than monetary policies. We need to do a lot to ensure food self-sufficiency by way of subsiding agricultural production rather than consumption. The government can also buy direct produce from farm to avoid waste. That way, we can achieve food self-sufficiency and avoid waste. The policy of cash distribution cannot solve the problem of food that is not there.
“The government cannot continue to give out rice as palliatives when the areas that are producing it are not being given attention. All these together will help to lessen the market prices of foodstuff in the country.”
To ensure food self-sufficiency, Prof Ajibola pleaded with the government to include agricultural inputs among the items that are already given duty waivers in the new tax reform bills before the National Assembly.
“The new tax reform bill is on the way which can also help. I understand that the president has put duty waivers on some good items. I will appeal they give the same waiver for farm inputs imported into the country to boost food production. If the prices of goods are affordable, it will reduce pressure on inflation.
“The Central Bank is struggling with monetary policy to fight inflation, but you fight inflation through monetary when that inflation is demand pull. The current inflation is cost-induced. The cost of production is going up in all sectors due to foreign exchange rates, local prices, and other challenges.
“So, 70 per cent of items that carry high prices are caused by cost-push inflation. We need to look at the structure of our economy in terms of trade policy and industrial policy, among others,” he added.
The MD, Cowry Assets Limited, Mr Johnson Chukwu, speaking in the same vein, harped on the positive signs that may likely give the economy a better outlook in the New Year.
“My take is that the economy will record a slow, but improved performance this year. Recall that the economy grew at about 4.9 per cent in last quarter, last year. We should expect some improvement in some sectors of the economy, including agriculture.
“There will be improvement in the level of security in the country which will moderate the challenge of food insecurity.
“There will also be some moderation in the inflation rate which may not necessarily produce any major improvement in household incomes. Inflation will remain above 20 per cent, which will further exert pressure on households. But generally, there will be a better growth rate in GDP; we will see some improvement in the exchange rate. The macroeconomic indices will not be as bad as they were last year.
“If the exchange rate improves further, we will still see a further decline in fuel prices which will have an effect on the inflation rate,” he posited.
The CEO, Flame Academy & Consulting Limited, Orji Udemezue, shared the same view, but slightly differed on attitudinal change.
In his opinion, the government has not demonstrated enough commitment to grow the economy through deliberate reduction in the cost of governance.
“I believe the economy may not get worse than it is now. The economy may benefit from the likely improved global economic outlook for 2025. However, that benefit will come down to Nigerians rather than the government of Nigeria.
“To start from inflation, the rate of inflation in Nigeria is due to the high cost of imported commodities not necessarily because we have excess liquidity in our economy.
“What the Central Bank of Nigeria has been doing is to tighten monetary policy to reduce the money in circulation until the rate is 30 per cent and inflation is not coming down. That means the tightening policy does not achieve the objective of tampering the inflation rate. Nigeria’s inflation has remained very high despite the CBN’s monetary tightening stand. That tells you that our inflation is caused by cost push not demand pull.
“I believe that despite Nigeria’s government and the CBN’s failure in fighting inflation, inflation in Nigeria may likely go lower this year. I see the US, a major player in the oil industry, pumping out more oil in line with Donald Trump’s electoral promises. Besides that, the global oil price is already showing a downward trend. I am looking at $60 to $65 per barrel. If that happens, it will be a pro-inflation factor for Nigerians because one major factor driving inflation in Nigeria is the cost of transportation. Once transport cost goes up, as it was when the president carelessly announced that the subsidy was gone, it affects the cost of everything else. When the effect of global price takes place, you will find out that prices will adjust locally due to the adjustment of transport costs to normal or pre-inflationary levels. That will be a positive trend for the economy which will be a benefit for Nigerians, but not necessarily Nigerian government.
“If the global price adjusts below $70 per barrel, it will have a negative effect on the budget which is not good enough for our fiscal year.
“If you look at our system, the tax reform of the present government may tend to move our revenue up, but at what cost? Many companies are folding up or leaving Nigeria because of the high cost of doing business in the country. As a manufacturer, you produce your electricity; yet, you can’t have an interest rate of less than 30 per cent. That is why manufacturers who are the drivers of productivity are all running away or adjusting their operations downward, resulting in downsizing. Several multinationals have closed down. That is not a pro-economic growth factor. So, we have to be careful how we tax this economy. The government can widen the tax net to make more money, but increasing the tax rate will be very dangerous for the economy.
“From that point of view, the economy may not witness significant growth this year. As these companies go away or scale down their operations in Nigeria, there will be an increase in the rate of unemployment; the level of productivity will go down.
“As of today, the ease of doing business index ranking in Nigeria as well as the operational cost is a major disincentive to investment. Small and Medium Scale enterprises are all struggling to survive.
“For me, the government has done nothing to stimulate economic growth in 2025. Rather, they are still engaged in wasteful spending. They want adjustment for Nigerians without adjusting government spending. Almost two years in office of the present administration, nothing has been done to implement Oronsaye report which can significantly bring down the cost of governance. All they do is share money at the executive level, build houses for judges, and so on. How do all these things impact the lives of ordinary Nigerians?
“In my view, the government is not taking any steps to show that they want this economy to prosper. All they do is create more avenues to siphon money. On the whole, Nigeria’s economy does not have any positive outlook in the medium and long terms,” he declared.