The Central Bank of Nigeria (CBN) has projected that Nigeria’s economy will grow by 4.1% in 2025. The projection also includes expectations of a decrease in inflation and a continued increase in foreign exchange inflows. However, experts have warned that the CBN’s new interest rate, which stands at 27.25%, could have negative consequences for investment and economic growth.
CBN Governor’s Economic Outlook for 2025
CBN Governor, Mr. Olayemi Cardoso, shared these projections during his keynote speech at the Nigeria Economic Summit Group (NESG) 2025 Macroeconomic Outlook event. According to Cardoso, the expected growth is driven by the government’s ongoing reforms, stable crude oil prices, and improvements in domestic oil production.
“The GDP growth is projected to rise to 4.17% in 2025, up from 3.36% in 2024,” Cardoso said. He explained that these positive outcomes would be supported by improvements in oil production, including the operations of major refineries like the Dangote refinery, as well as the revitalization of Port Harcourt and Warri refineries.
The CBN governor also highlighted the projected decline in domestic inflation as a result of these economic reforms. Cardoso said that inflation, which has been a major concern in recent years, would see a decrease in 2025, thanks to these changes.
Factors Supporting Economic Growth
Cardoso pointed to several factors that are expected to support the growth projections. One of the key drivers is the expected improvements in the country’s oil production. Nigeria’s oil production could reach 2.3 million barrels per day by mid-2025, up from the current levels. This increase, along with higher refining capacity, will help stabilize the economy and improve the country’s foreign reserves.
Additionally, Nigeria’s external reserves are projected to grow steadily due to the increased oil production and expected rise in foreign capital inflows. As a result, Nigeria is expected to continue seeing strong export performance and steady remittances from Nigerians in the diaspora.
Concerns Over the CBN’s Interest Rate Policy
Despite the positive projections, experts have raised concerns about the CBN’s decision to increase the interest rate to 27.25%. While the CBN argues that the rate hike is necessary to curb inflation, economists warn that it could hurt investment and slow down economic growth.
The high interest rate makes borrowing expensive for businesses, which could lead to lower investment and slower economic growth. Additionally, this could put pressure on Nigerians, especially those already struggling with high living costs. Small businesses, in particular, may find it difficult to survive under such conditions, potentially leading to job losses and higher unemployment rates.
The increase in the interest rate could also lead to a rise in the cost of living, further affecting the poor and vulnerable members of society. Critics argue that while controlling inflation is important, a balance needs to be struck to ensure that businesses can thrive and the economy does not stagnate.
Achieving Inflation Targets: The Role of Fiscal Policy
One of the key goals for 2025 is reducing inflation. The Federal Government has defended its projection that inflation will decrease to 15% in 2025, down from the current high levels. Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, explained that the expected decrease in inflation is based on data and the “base effect.”
“The base effect means that inflation in 2024 was very high, and so compared to that, inflation in 2025 is expected to be lower,” Oyedele explained during a panel session at the NESG event. “In 2024, inflation was about 33%, and based on that, the inflation rate in 2025 is expected to be around 15%.”
He further explained that factors such as fuel scarcity, which had driven up inflation in the past, are no longer a major concern. With fuel supply now more secure, and fuel prices expected to stabilize, the inflation rate is projected to ease.
Experts also note that the full implementation of economic reforms will play a major role in controlling inflation. As the economy stabilizes and grows, the pressure on prices is expected to decrease.
The Role of the NESG in Economic Stability
The NESG, a leading policy advocacy group, has also put forward recommendations to help Nigeria achieve economic stability in 2025. According to the Chairman of the NESG, Mr. Olaniyi Yusuf, Nigeria needs to rethink its strategies to achieve long-term economic stability.
Yusuf emphasized the need for a more inclusive approach that would address the socioeconomic needs of Nigerians, particularly the vulnerable population. He stressed that as the country works towards economic transformation, it must also focus on reducing poverty and ensuring that the benefits of growth are shared widely.
The NESG has recommended that the government continue its efforts to improve the business environment, enhance transparency in the foreign exchange market, and work closely with the private sector to boost productivity.
The World Bank’s Input on Economic Reforms
The World Bank has also weighed in on Nigeria’s economic outlook, calling for continued implementation of economic reforms. The institution urged the government to focus on expanding the number of beneficiaries of its social intervention programs, which are aimed at alleviating the hardships faced by the poor.
According to the World Bank, the social intervention programs should be expanded to reduce the cost of the ongoing reforms on vulnerable Nigerians. The World Bank believes that while the current economic reforms are necessary for long-term growth, it is important to protect the most disadvantaged members of society from the negative impacts of these changes.
