Agencies
Nigerians may be wondering whether the year 2025 will bring the “renewed hope” promised by the President Bola Tinubu administration – or whether they are in for another year of economic despair.
Nigerians are facing unprecedented economic challenges, arising from the removal of fuel subsidies. This has raised the price of petrol by nearly 500 percent within one year. What’s more, the liberalization of the foreign exchange market resulted in an over 100 percent depreciation in the value of the domestic currency between October 2023 and October 2024.
And to rein in headline inflation, which stood at 34.6 percent in November 2024, the Central Bank of Nigeria has been pursuing a contractionary monetary policy – attempt to fend off inflation by reducing money supply.
It increased the interest rate from 15.5 percent in October 2023 to 27.25 percent in September 2024. These policies have reduced the living standards of Nigerians. People must now pay higher prices for food, transportation, energy, health and education.
The government has also introduced tax reforms, a student loan scheme and a new minimum wage. Nigerians have voiced their dissatisfaction.
In early August 2024, there were widespread protests, tagged #EndBadGovernance, across the country. This was followed in October by similar protests.
While Nigerians resent Tinubu’s economic policies, the World Bank has applauded the administration for decisively addressing long-standing problems, and urged it to stay the course.
The administration has appealed to Nigerians to be patient, promising that its economic reforms will yield positive results soon.
The question is: how soon? Economic forecasting is not a science free of errors. But as a development economist who has been studying the Nigerian economy for more than 40 years, I believe certain trends are likely to play out in 2025. The government’s policies are unlikely to have a positive impact on the living conditions of Nigerians in 2025.
Positive effects of policies usually become noticeable after about three years. Economic growth drives much of what happens across the economy, including employment, education, health and living standards.
Nigeria, like many countries in the world, experienced a post-COVID economic rebound.
It posted a respectable economic growth rate of 3.6 percent in 2021, 3.3 percent in 2022 and 2.9 percent in 2023. Growth is expected by the IMF to continue in 2025, though at a subdued rate of about 3 percent, less than the 4 percent projected for sub-Saharan African countries in 2025.
The lower growth rate is attributable to lower-than-expected oil production, insecurity in many parts of the country, and scarcity of foreign exchange, which has made it difficult for manufacturers to import the inputs they need for production. Nigeria needs a growth rate of at least 6 percent for three consecutive years to make a significant impact on living standards.
Growth in the country has been driven by the services sector, which expanded by 3.8 percent in the second quarter of 2024. Industry was the second biggest driver at 3.5 percent.
The trend is expected to continue in 2025. But services – finance, construction, entertainment, hospitality, government – are concentrated in urban areas.
Most Nigerians who live in rural areas will not feel the effects of any job creation arising from economic growth. The growth of the manufacturing sector, which is typically a major source of employment, will be anaemic in 2025.
