CBN Monetary Policies In Nigeria: Progress And Challenges In 2025

“It never rains roses; if you want more roses, you have to plant more.”

After months of strategic adjustments, the Central Bank of Nigeria (CBN) is making significant progress in stabilizing the country’s economy. The exchange rate is showing more consistency, with the disparity between official and parallel market rates narrowing. For the first time in years, Nigeria is on the path to achieving a relatively stable exchange rate, which is essential for economic planning. However, financial analyst Bismarck Rewane has noted that the CBN is indirectly supporting the naira, raising concerns about how long this intervention can continue. Without ongoing support, the current gains might be short-lived, potentially leading to another increase in exchange rates.

The Role of Fiscal Policy in Sustainable Economic Growth

While effective monetary policies are crucial, they alone cannot drive long-term economic stability. Sound fiscal policies must complement them to solidify the progress made.

A key element of fiscal policy is enhancing productivity. For Nigeria’s Gross Domestic Product (GDP) to experience substantial growth, there must be a focus on real productivity rather than statistical adjustments and economic rebasing.

The sectors that require urgent productivity improvement include:

Petroleum (upstream and downstream)
Agriculture
Manufacturing
Essential services such as telecommunications, transportation, education, healthcare, and hospitality.

Without significant growth in these industries, the progress made by the CBN could be undone.

Petroleum Sector: Reality vs. Political Projections

Recent government reports claim that Nigeria has the capacity to produce 2.24 million barrels per day (mbpd). However, this is more of a political declaration than a practical reality. Although Nigeria has had similar production potential in the past, actual output has consistently fallen short. In January 2025, production was well below this target, and February’s output is unlikely to reach even 2 mbpd.

Furthermore, Nigeria’s production is restricted by its Organization of Petroleum Exporting Countries (OPEC) quota, currently capped at 1.7 mbpd (excluding condensates). Exceeding this quota could trigger a backlash, leading to lower crude oil prices. The global demand for crude is also unstable, and long-term trends indicate a shift away from fossil fuels. This places Nigeria in a precarious position, as the country still heavily depends on oil revenue for economic survival.

Agriculture: High Hopes but Traditional Methods Persist

The Federal Government and some state governments have increased agricultural investments, yet progress remains slow due to outdated practices. The arrival of Belarusian tractors was expected to boost mechanized farming, but their numbers are insufficient to create meaningful impact. Additionally, without skilled operators and reliable spare parts, these tractors risk becoming obsolete quickly.

Other challenges in the agricultural sector include:

Rising fertilizer costs
Scarcity of farmworkers
Security threats from bandits, making farming increasingly dangerous

Despite these setbacks, agriculture remains a promising sector if innovative solutions are implemented.

Manufacturing: Struggling Amid High Costs

The manufacturing industry faces significant hurdles, particularly with increasing production costs. Members of the Manufacturers Association of Nigeria (MAN) aim to boost capacity utilization to lower costs, but multiple factors are working against them:

High energy and power costs
Rising communication tariffs
Soaring interest rates

Government-imposed taxes and levies further inflate production expenses, leading to higher prices and reduced consumer demand. With declining purchasing power, it is uncertain when the manufacturing sector will experience a meaningful turnaround.

Interest Rates: The Burden on Investors

Interest rates are critical in both long-term investments and short-term borrowing. Following the rebasing that cut 10% off inflation rates, manufacturers anticipated an interest rate reduction. However, the CBN maintained existing rates, prolonging the financial burden on businesses.

Essential Services: The Impact of Economic Decline

With declining purchasing power, Nigerians are shifting away from essential services such as healthcare. Public hospitals, once a last resort for the masses, are seeing fewer patients due to increased medical costs. Laboratory test fees and medication prices continue to rise, pushing many towards alternative medicine.

ICT Sector: A Declining Growth Rate

The Information and Communications Technology (ICT) sector, a major contributor to Nigeria’s GDP, has experienced a sharp decline. According to the National Bureau of Statistics (NBS), ICT growth dropped to 5.42% in 2024—the lowest since 2022.

Key indicators of this decline include:

Reduced call frequency and chat durations
MTN and other telecom companies facing significant losses
Potential future tariff hikes

Crude Oil Revenue and Nigeria’s Budget Deficit

Crude oil revenue remains Nigeria’s primary source of income. However, for the past decade, the government has consistently failed to meet projected oil revenue targets. This has led to increasing national debt, with a growing percentage of revenue allocated to debt repayment.

Government Revenue: The Hidden Crisis

Despite an increase in revenue allocations to the Federal Government (FG), States, and Local Governments, inflation has significantly eroded their actual financial strength. This has impaired their ability to fulfill political promises. The fluctuating exchange rate presents a dilemma for the government—publicly, they support the CBN’s exchange rate stabilization efforts, but privately, they recognize that devaluation has boosted Value Added Tax (VAT) collections. A stronger naira could mean reduced government revenue.

At present, financial strains are evident within government agencies. The National Youth Service Corps (NYSC) and several Federal Ministries, Departments, and Agencies (MDAs) are experiencing difficulties in meeting their financial obligations.

Conclusion: What Lies Ahead?

While the CBN’s monetary policies have shown positive results, sustainability remains uncertain. Without structural improvements in fiscal policy, increased productivity, and better economic diversification, the current progress could be short-lived. The Nigerian government must urgently address these challenges to ensure long-term economic stability.