How Nigeria can sustain gains of reforms in 2025

The Nigerian economy witnessed one of its tumultuous years in 2024 as prices rose to record levels while naira plummeted to its worst as a result of the radical reforms implemented in 2023.

But the policies – scrapping of fuel subsidies and liberalisation of the foreign exchange – have begun to bear fruits albeit gradually. However, the federal government has been urged to stay the course despite the short term pains to sustain gains of reforms.

In their 2025 outlook, titled, ‘Pressure to Plateau,’ Cardinalstone, a research and investment firm, highlighted three measures that must be adopted to complement and expedite the reform efforts.

“Addressing the longstanding structural constraints to inflation to complement the CBN’s monetary efforts; promoting export-driven initiatives, especially non-oil, to boost FX earnings; and resolving insecurity challenges to create a conducive environment for economic growth,” the report explained.

“The most critical recommendation is, however, outside of these three, and it is staying the course despite short-term pressures,” it added.

Read also: Tinubu eyes reforms consolidation to drive growth

The analysts’ assertion corroborates the stance of the World Bank which stated last year that the country would need to stay the course for at least 10 to 15 years to transform its economy and become an engine of growth in Sub-Saharan Africa.

In the last decade, Nigeria has initiated over 10 economic reforms, which delivered an average GDP growth rate of 8.3 percent compared to 1.7 percent in the pre-reform period and average foreign direct investment (FDI) inflows of $4.1 billion up from $811.07 million in the pre-reform era.

These policies embarked on by President Bola Tinubu have however seen the nation’s economy grow at its fastest pace since 2014, with Gross Domestic Product (GDP) growth expected to reach 3.7 percent, according to analysts at CardinalStone.

This growth is attributed to the healthy performances in the oil & gas and manufacturing sectors which are poised to significantly contribute to the country’s economy in the coming year.

But the limited social safety net provisions following government reforms, coupled with multi-decade high inflation and a volatile exchange rate, have intensified the cost-of-living crisis, dampened business profitability, and hampered productivity.

Consequently, Nigeria slipped from being Africa’s second-largest economy in 2023 to fourth place in 2024 with South Africa being the top economy out of the continent.

“Despite these economic headwinds, we maintain our view, which was recently corroborated by a World Bank report, that the reform agenda should be sustained and that most of the pressures facing the country are temporary.

“More still, the worst impacts may have already been felt, with major economic markers already turning green and the benefits of reforms looking set to materialize in the medium term,” the report stated.

The report revealed that inflation is projected to moderate, and the Central Bank of Nigeria (CBN) is likely to lower interest rates in the second half of the year, creating an optimistic outlook for both fixed income and equities.