Naira seen appreciating to 1,300/$ in 2025
As Nigeria approaches 2025, the country’s economic landscape is expected to experience a positive shift, with experts projecting significant improvements in key financial indicators. The Nigerian Economic Summit Group (NESG) has forecast a notable appreciation of the naira, alongside increased economic growth and a decline in inflation. However, these optimistic projections hinge on the country’s ability to implement effective stabilisation measures.
Strengthening the Naira: A Path to Stability
The NESG has projected that the naira could stabilise at an average exchange rate of ₦1,300 to the US dollar in 2025, provided Nigeria follows an optimal stabilisation strategy. This forecast is underpinned by expectations of increased foreign exchange earnings, bolstered by higher crude oil sales, a resurgence in manufacturing—particularly within the oil refining sector—and improved agricultural productivity. Given that crude oil remains Nigeria’s largest export, stable global demand and enhanced local production are anticipated to strengthen export revenues significantly.
Projected Economic Growth and Sectoral Expansion
The NESG’s 2025 economic outlook anticipates a robust real GDP growth rate of 5.5%, contingent on the implementation of comprehensive economic reforms. These measures aim to address challenges across multiple sectors while enabling broad-based growth. The report highlights that in 2024, sectoral growth was limited, with only four out of twenty key industries recording expansion rates exceeding 5%. In contrast, a more widespread economic recovery is expected in 2025, driven by policies that tackle structural issues impeding progress.
Inflation Decline and Macroeconomic Stability
Another key projection by the NESG is a significant reduction in inflation, which is expected to decline to 24.7% in 2025. This forecast assumes effective coordination between fiscal and monetary policies, improved foreign exchange market stability due to increased supply, and reduced speculative demand.
Agricultural output is expected to play a critical role in this stabilisation process. With better security in farming regions and improved access to farmland, increased food production is set to alleviate scarcity and stabilise food prices. Given that food costs remain a primary driver of inflation in Nigeria, these improvements are expected to have a substantial impact on overall price stability.
The Role of the Central Bank of Nigeria (CBN)
Reflecting on the economic challenges of 2024, Olaniyi Yusuf, Chairman of NESG, highlighted the depreciation of the naira, which fell by 41.4% to close at ₦1,536.5 per US dollar. However, he acknowledged the Central Bank of Nigeria’s (CBN) commitment to policies aimed at fostering price discovery and narrowing the gap between the official and parallel market exchange rates.
CBN Governor, Olayemi Cardoso, expressed confidence in the naira’s stability, attributing recent improvements to forex reforms. “I am very confident that we are going to see a positive outcome. In fact, we are already witnessing the impact, particularly in terms of foreign remittances. The inflows through international money transfer operators have been remarkable,” Cardoso stated.
Despite the economic difficulties of 2024—marked by dwindling foreign exchange reserves, declining oil prices, and reduced oil production—Cardoso stressed the importance of innovative solutions. “Rather than dwell on our difficulties, we explored new opportunities, and the results have been encouraging. The reforms are yielding positive outcomes,” he said.
Key Economic Reforms and Market Efficiency
Several key reforms introduced by the CBN in 2024 have played a pivotal role in stabilising the naira and boosting investor confidence. These measures include:
- Clearing $7 billion in verified forex commitments.
- Discontinuing quasi-fiscal interventions.
- Unifying multiple exchange rate windows.
- Implementing a market-driven forex matching system.
Additionally, the CBN approved 14 new international money transfer operators and launched a non-resident Bank Verification Number (BVN) initiative to enable seamless banking services for Nigerians abroad. Cardoso highlighted that these initiatives address both local and international financial needs while fostering economic growth.
Foreign Investments and External Reserves
Reflecting on Nigeria’s economic milestones in 2024, Cardoso revealed that the country recorded over $6 billion in foreign capital inflows, with external reserves surpassing $40 billion. “These achievements signify growing investor confidence in our economy. Our efforts have not only increased the quantity of reserves but also improved their quality,” he remarked.
He also acknowledged the advantages of the adjusted forex rate. “Yes, the depreciation has its challenges, particularly for an import-dependent economy like ours. However, it also presents significant opportunities. Our currency is now more competitive, which is attracting foreign investors and boosting export potential. The implications for productive activity are substantial,” Cardoso said.
Looking Ahead to 2025
As Nigeria moves forward, the CBN remains committed to deepening and strengthening economic reforms. The focus will be on enhancing financial inclusion, engaging the Nigerian diaspora, and improving regulatory compliance. Cardoso reiterated the importance of transparency and market efficiency, stating, “We will remain vigilant, ensuring that all market participants adhere to best practices. Those who fail to comply will face appropriate consequences.”
With the implementation of these stabilisation measures, Nigeria stands poised for economic recovery and sustainable growth in 2025. The coming year presents a crucial opportunity to solidify gains, attract investment, and create a more resilient and competitive economy.