Between 2024 Economic Situation and 2025 Development Permutation
By Zeenat Sambo
Nigeria’s economic performance in 2024 was marked by gains and losses in both micro and macro-economic areas. While 2024 was dominated by complaints of economic hardship – high cost of basic commodities in face of low purchasing power – the year closed with flashes of good news that have the potential to make 2025 a better one.
Inflation
In early January 2024, Nigeria’s economy experienced a significant surge in inflation, rising to 29.90% from 28.92% in December 2023. This 0.98% increase marked the highest inflation rate in recent times. The driving factors behind this surge were attributed to the removal of fuel subsidy, currency devaluation, and supply chain challenges, including structural inefficiencies, insecurity, and poor infrastructure. Nothing changed in the course of the year. In fact, things got progressively worse.
In November 2024, Nigeria’s headline inflation rate surged to 34.60%, driven by rising costs of goods and services across the country. According to the Consumer Price Index (CPI) data released by the Nigeria Bureau of Statistics (NBS), headline inflation rose 0.72% from 33.88% in October. Although there was a slight easing in July and August, the sudden rise was attributed to the lingering effects of naira devaluation and petrol price increases.
As 2024 drew to a close, pending challenges were expected to ease, driven by a drop in fuel prices, gross foreign exchange reserves exceeding $40 billion, and increased transparency in net reserves. These factors were expected to recapitalise the economy and cushion the inflation surge, despite the backdrop of naira devaluation.
Driven by increasing transportation costs, agricultural inputs, and insecurity in key farming regions, food inflation was also a big problem for Nigeria in 2024. The food inflation rate soared to 40% in November 2024, up from 32.84% in November 2023, and 23.75% in December 2022.
The surge in food prices was caused by increases in items like yam, potatoes, maize grains, rice, palm oil, and vegetable oil.
A report revealed that Nigerians were resorting to desperate measures to survive amid the worsening food crisis. Despite a conservative threshold of N1,255 per healthy diet, many citizens found feeding unbearable, with some resorting to alms begging or searching for food in waste bins.
To address the rising food inflation, the minister of finance and coordinating minister of the economy, Wale Edun, unveiled plans to support the agricultural sector, enhancing production of rice, maize, wheat, and cassava. President Bola Ahmed Tinubu also reiterated plans to provide farmers with low-interest loans and improve security to enable them to return to their farms.
MPR Adjustments and Other CBN Interventions
The Central Bank of Nigeria (CBN) implemented various measures to combat rising inflation in 2024, with a significant focus on adjusting the Monetary Policy Rate (MPR). The MPR was raised by 200 basis points to 26.25% in May, followed by subsequent increases of 50 basis points to 26.75% in July, another 50 basis points to 27.25% in September, and a final 25 basis point increase to 27.50% in November 2024.
These incremental hikes resulted in a cumulative increase of 875 basis points for the year. To further combat inflation, the CBN employed other measures, including the Inflation-Targeting Framework to enhance policy effectiveness and strengthening Foreign Exchange Market reforms by improving transparency and efficiency in the foreign exchange market.
To also mitigate the effects of inflation, the CBN launched its Series I Domestic USD Bond, aiming to raise at least $500 million from local and international investors. Furthermore, the Federal Government secured N211.144 billion from its December 2024 bond auction, bolstering efforts to stabilize the economy.
Again, the CBN issued N1.5 trillion in Open Market Operation (OMO) bills to combat inflation and stabilise the naira, whose sharp decline had unsettled the economy. OMO bills are a liquidity management tool used by the CBN to regulate the money supply. When the central bank detects excess liquidity, it sells OMO bills to investors through banks, absorbing surplus funds. Conversely, when liquidity is low, the CBN buys back these bills. The CBN’s inflation-targeting policy aimed to reduce inflation to 21.4%.
Naira’s Free Fall
As of January 3, 2024, the exchange rate at the Parallel Market (Black Market) was N1,220 (buy) and N1,230 (sell), while the official market sold for 913/$ and 914/$, respectively. The naira’s value depreciated further to N1,360/$, N1,410, and finally N1,506/$ by the end of January.
The naira’s free fall was attributed to a combination of structural policies and market-related factors, including exchange rate unification, foreign exchange shortages, external debt obligations, and fuel subsidy removal. Despite the CBN’s intervention, releasing $500 million to address verified foreign exchange transactions, the naira continued to depreciate at both the official and parallel markets.
Minimum Wage
A significant achievement of the Tinubu administration in 2024 was the signing of a new minimum wage for Nigerian workers. After prolonged negotiations between the Nigeria Labour Congress, Trade Union Congress, and the presidency, President Tinubu approved a minimum wage of N70,000 for workers on July 18, 2024. This development brought smiles to the faces of civil servants in the midst of the challenges they faced in the course of the year.
Several states, including Lagos, Ogun, Gombe, Ondo, and Kogi, announced minimum wages higher than the federal mandate, ranging from N71,451 to N85,000. Although implementation has been gradual, the federal government assured organized labor that states would implement the new wage starting from January 2025.
Oil and Gas
The Dangote Refinery breakthrough in January 2024 marked a significant milestone in Nigeria’s energy sector. However, the subsequent increase in petrol prices, exceeding N1,200 at various gas stations, sparked controversy. The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) accused Dangote Refinery of attempting to monopolise the downstream petroleum sector.
In response, Aliko Dangote, CEO of Dangote Group, clarified that the company’s pricing strategy was not monopolistic. The Port Harcourt and Warri refinery refurbishment was completed in November, leading to a drop in PMS prices at NNPCL filling stations. The government also launched a compressed natural gas (CNG) initiative to reduce transportation costs and create jobs.
Power Grid Collapse
Nigeria’s power grid experienced frequent collapses in 2024, resulting in widespread power outages and unreliable energy supply. The Transition Company of Nigeria (TCN) attributed the incidents to vandalisation, with 128 transmission towers destroyed between January 13, 2024. Efforts to address the issue include the issuance of 13 new licenses for off-grid and embedded power generation.
Tax Reform Bill
President Tinubu affirmed that tax reform is essential for Nigeria’s economic growth. The proposed Tax Reform Bill aims to eliminate colonial-era assumptions and provide a clear framework for taxation. The bill includes provisions for no income tax on individuals earning N800,000 or less, tax exemptions for businesses with N50 million or less, and a harmonized revenue collection system.
However, the bill has faced opposition from the northern part of the country whose leaders believe doesn’t augur well for the people. Despite scaling second reading at the senate in November, the bill’s fate remains uncertain.
Economic Growth
The country’s economic watchers highlighted the country’s significant economic progress in 2024, with a growth rate of 3.46 percent in the third quarter, surpassing the projected global economic growth rate of 3.2 percent.
National Debt
Nigeria’s total public debt stood at ₦46.25 trillion (approximately $103.11 billion) as of December 31, 2023. This figure includes both domestic and external debt obligations
The debt stabled throughout January and February but by March 31, 2024, the debt had risen to ₦121.67 trillion (about $91.46 billion), reflecting new borrowings and the impact of exchange rate depreciation, according to Debt Management Office (DMO).
Recall that in June 2024, the World Bank approved a $2.25 billion loan for Nigeria to support economic reforms and provide social assistance. This loan comprises $1.5 billion aimed at protecting vulnerable populations and $750 million designated for tax reforms and safeguarding oil revenues.
As of December 2024, Nigeria’s total public debt was projected to reach approximately ₦130 trillion.
2025 Budget Proposal
President Tinubu proposed ₦47.9 trillion as Budget for 2025. Titled “The Restoration Budget: Securing Peace, Rebuilding Prosperity,” the estimate was submitted to the Senate on December 18, 2024.
According to the President, the budget aims to restructure the economy, boost human capital development, and increase trade and investments.
The proposed budget targets 34.82 trillion naira in revenue, with a projected expenditure of 47.90 trillion naira, including 15.81 trillion naira for debt servicing. The budget deficit is expected to be 13.08 trillion naira, or 3.89 percent of GDP.
2025 Economic Outlook
Despite the challenges posed by the economic downturn, the 2025 budget proposal presents an optimistic and promising economic outlook, with potential for higher growth.
This year has to be that of reality check when Nigerians will expect to see the fruits of what they have laboured for since 2023, that is, the rewards of their sacrifices.
The signs are there that results will emerge in 2025 with the symptoms of economic growth witnessed in the last quarter of 2024.
Zeenat Sambo is a Senior Reporter with Image Merchants Promotion Limited; she can be reached via: [email protected]
