While addressing the country on January 1, 2025, President Bola Ahmed Tinubu reiterated his administration’s steadfast resolve to curb inflation, targeting a significant reduction from 34.60% to 15% by the close of 2025. The target underscores the administration’s focus on restoring economic stability and alleviating Nigeria’s rising cost of living—as inflation control remains critical in promoting economic confidence and sustainable growth.
According to a recent World Bank report on Nigeria’s macroeconomic outlook, factors such as stricter monetary policies and broader economic reforms are key factors to the country’s projected inflationary decline, that is, below 20% by 2026. The projection aligns closely with President Tinubu’s goal of reducing inflation to 15% by 2025, validating the administration’s policy direction.
In the week under review, the Naira traded at a high of $/₦1,550.00 on Tuesday and at a low of $/₦1,520.00—on the same day. The week closed at $/₦1,535.00, according to data from the Nigerian Foreign Exchange Market.
Data from the Central Bank of Nigeria’s (CBN) Monthly Economic Report for October 2024 highlights a sharp 28% year-on-year increase in deficit spending, with the Federal Government recording a fiscal deficit of ₦12.1 trillion in the first ten months of 2024. The deficit surpasses the ₦9.8 trillion budgeted for the year, underscoring higher-than-anticipated expenditure pressures.
However, revenue inflows to the Federal Government also saw significant growth, rising by 36% year-on-year. Total revenue to the Federation Account surged 54.5% year-on-year to ₦20.214 trillion, compared to ₦13.079 trillion in the same period in 2023. Despite the robust revenue performance, the widening fiscal gap remains a concern, necessitating stringent fiscal management in 2025 to curtail debt accumulation.
At the final OMO auction for the year 2024, the DMO sold a total of ₦500 billion worth of bills, which was the same as the amount offered. We saw lower stop rates due to heightened demand from foreign portfolio investors (FPIs), with the total subscription reaching almost ₦1 trillion.
On Monday, the CBN offered ₦500 billion in OMO bills across two maturities—the 358-day and the 365-day. The stop rates were set at 23.93% and 23.95%, reflecting a marginal decline of 2 and 3 basis points from previous auction rates. Analysts attribute the strong demand to attractive yield levels and the CBN’s preference for Dollar inflows to support forex reserves.
TENOR | AUCTION DATE | OFFER (₦’ B) | BIDS (₦’ B) | RANGE OF BIDS (%) | STOP RATES (%) | PREVIOUS STOP RATES (%) | TOTAL SALE (₦’ B) |
358-DAY | 30-12-2024 | 250.00 | 228.00 | 23.8400-24.2800 | 23.9300 | 23.9500 | 100.00 |
365-DAY | 30-12-2024 | 250.00 | 703.32 | 23.8200-23.9800 | 23.9500 | 23.9800 | 400.00 |
On the lips of many is Nigeria’s goal of achieving a 15% inflation rate target by 2025 from its current level of 34.60%. Market participants believe this is a daring target given prevailing economic conditions. Achieving such a significant reduction in inflation would require a combination of effective monetary policies, fiscal discipline, and structural reforms. While the Government has outlined plans to stabilise prices, the outcome largely depends on its ability to address key inflation drivers, including high food prices, energy costs, and exchange rate volatility.
The exchange rate, currently projected at $/₦1,500, is another critical factor. A stable exchange rate is essential for controlling imported inflation, given Nigeria’s heavy reliance on imports for both consumer goods and industrial inputs. To achieve its target, the Government would need to implement policies that enhance foreign exchange liquidity, reduce dependency on imports, and promote local production. The Central Bank’s intervention in the foreign exchange market, coupled with measures to boost export earnings, would play a vital role.
However, with ongoing fiscal pressures, subsidy removals, and global economic uncertainties, meeting both the inflation and exchange rate targets may be challenging. Where inflation moderates somewhat, reaching a 15% target by 2025 might be overly optimistic unless there is a significant shift in policy direction and economic management. While the Government’s targets are commendable, achieving them would require extraordinary measures and a stable macroeconomic environment. As for yields, their trajectory will depend on how well inflation is managed and whether investor confidence in government instruments improves in light of these efforts.
During the President’s New Year address, the President praised the impressive performance of the Nigerian stock market in 2024, which generated trillions of Naira in wealth. This remarkable growth alongside increased foreign investment inflows, signals renewed global confidence in the nation’s evolving economic outlook.
Additionally, President Tinubu acknowledged the severe strain that escalating food and essential drug prices have placed on many Nigerian households, pledging that 2025 would witness concerted efforts to ease this burden through targeted interventions and reforms aimed at boosting supply chains and improving price stability.
Sequel to the commendations from the World Bank on Nigeria’s bold macroeconomic policy steps and emphasis on the difficult, but necessary decisions being implemented to achieve long-term fiscal and monetary stability, it is agreed that such measures are crucial and would contribute to laying the groundwork for inclusive and sustainable growth in this new year.
In 2024, the Nigerian Treasury Bills (NTBs) auctions witnessed a blend of stability and fluctuations, with stop rates oscillating throughout the year and peaking at around 23%. As the markets gear up for the first NTBs auction of 2025 on Wednesday, with a total offer of ₦74.406 billion, there are growing expectations of how rates may respond to prevailing economic conditions.
Given the economic backdrop, including inflationary pressures and monetary policy adjustments, market participants may anticipate a cautious approach from the Debt Management Office. The likelihood of a marginal upward movement in stop rates cannot be ruled out, particularly where liquidity remains tight or where inflationary concerns persist. Conversely, if there is sufficient demand from investors, particularly banks and pension fund administrators seeking short-term instruments, stop rates could stabilise or even decline slightly.
Another factor that could influence the outcome is the Central Bank’s stance on interest rates and its intervention in the open market. Should the apex bank maintain a hawkish policy, rates may trend upwards, reflecting broader efforts to curb inflation. In contrast, any indication of policy easing could provide room for lower yields.
For commodities, global oil prices fluctuated throughout the previous year, driven by geopolitical tensions in the Middle East and reduced demand from China. On the first trading day of 2025, Brent crude rose marginally by 0.06% to $74.80 per barrel, while WTI crude gained 0.26%, closing at $71.91 per barrel.
The Nigerian government’s 2025 budget also assumed an oil price benchmark of $75 per barrel, alongside a production target of over 2 million barrels per day. Achieving these targets will be crucial for sustaining revenue growth and reducing fiscal pressure in the coming year.
