Central banks play a pivotal role in stabilizing a nation’s currency and economy through the implementation of monetary policies. However, their actions are often misunderstood, especially during times of economic challenges. According to PwC, it is crucial for central banks to communicate their objectives clearly and effectively to foster a proper understanding and positive public perception. This becomes even more important during economic stress periods. The Central Bank of Nigeria (CBN) has been proactively working on various policy options aimed at reviving the economy, despite significant challenges. When the current CBN leadership, under Governor Olayemi Cardoso, assumed office, it inherited an economy grappling with a failed naira redesign policy, rising inflation, and a volatile exchange rate. During his Senate screening, Cardoso acknowledged these issues but expressed optimism in the bank’s ability to implement policies that would stabilize the economy and improve public perception of the CBN. Governor Cardoso, a seasoned banker and public policy expert with a Master’s in Public Administration from Harvard Kennedy School, has a rich background in the financial sector. Prior to his appointment, he served as the Chairman of Citi Bank Nigeria and Commissioner for Economic Planning and Budget in Lagos State. Upon taking office, Cardoso was quick to refocus the CBN’s operations, aiming to minimize inefficiencies and enhance its core functions. This included returning to traditional monetary policy tools and separating the blurred lines between monetary and fiscal policies. Under Cardoso’s leadership, the CBN has centered its efforts on its primary responsibilities—setting interest rates, controlling money supply to achieve stability, formulating monetary policy, managing foreign reserves, and advising the government. One key policy carried forward from the previous administration is the unified and free-floating exchange rate regime. While this approach was supported by the World Bank, some experts warned of potential currency crises, especially as the naira depreciated to N945/USD after its implementation. The free-floating exchange rate offers several advantages, such as attracting foreign investments and allowing the currency to adjust naturally to economic changes. However, it also comes with risks, including volatility, speculation, and the possibility of worsening economic conditions in a struggling economy. Exchange rate management is a critical factor in determining trade flows and the overall health of the economy, with imports and exports playing a significant role. Currency speculation poses a serious challenge to the economy, as it is not backed by any real economic activity but driven by the motive to profit from currency fluctuations. Speculators often destabilize the currency by buying when prices are expected to rise or selling when the currency weakens. To combat this, the CBN has introduced several creative policy measures. For example, the Bank has used dollar injections into the foreign exchange market to stabilize the naira and launched the Price Verification System (PVS) portal for importers and exporters. Additionally, the CBN has directed Bureaux de Change (BDC) to align their exchange rates with those in the Importers and Exporters (I&E) Window to enhance the efficiency of the foreign exchange market. In December 2024, the CBN introduced the Electronic Foreign Exchange Matching System (EFEMS), an online platform designed to match buy and sell orders for foreign exchange transactions. EFEMS aims to reduce speculation and distortions in the market, enabling real-time price discovery. Early reports suggest that EFEMS has helped stabilize the naira’s volatility. On inflation, the CBN has adopted an explicit inflation-targeting framework to improve the effectiveness of its monetary policies. Looking ahead, the CBN is targeting an inflation rate of 15% in 2025 and projects a 4.17% GDP growth, surpassing the 3.2% forecast by the International Monetary Fund (IMF). While the full impact of these policy measures may take time, the CBN is confident in their ability to bring about the desired economic improvements. READ ALSO: Follow the LMSINT MEDIA channel on WhatsApp: Join Our WhatsApp Group Hear: Chat on WhatsApp Join our Telegram Chanel.
Emir of Kano, Muhammadu Sanusi II, has expressed concerns over the absence of credible individuals within President Bola Tinubu’s administration to effectively communicate its economic policies. At the 21st Memorial Lecture of Chief Gani Fawehinmi held in Lagos on Wednesday, the former governor of the Central Bank of Nigeria stated that the government lacks reliable figures who can adequately explain its actions to the public. “I don’t want to help this government. They’re my friends, but if they don’t act like friends, I won’t act like one either. They don’t have credible people who can step up and explain what they’re doing. I refuse to assist them,” Sanusi remarked. He further stated that while he could offer insights into the current economic crisis in Nigeria, including whether it was predictable or avoidable, he had chosen to refrain from commenting on the nation’s economic situation. “I’ve decided not to speak about the economy,” he concluded. Sanusi’s remarks came in the wake of his ongoing critique of the challenging economic conditions under President Tinubu’s leadership in 2024. He emphasized that the nation is grappling with severe hardships, with ordinary Nigerians struggling to cope with soaring food prices. “People are in a dire situation,” he lamented, adding that many are now forced to buy just half a pepper due to the high cost of food. “This is unbearable.” Since President Tinubu’s controversial removal of fuel subsidies and the unification of the exchange rate, the nation has witnessed dramatic price hikes. Fuel prices have soared to N1,000 per liter, and the naira now trades at over N1,500 to the US dollar. Inflation has exceeded 34%, further exacerbating the financial strain on the population. These developments sparked a 10-day protest in August 2024, as Nigerians voiced their frustration. Despite the ongoing economic struggles, President Tinubu has defended his policies, claiming that the hardships faced by citizens are necessary sacrifices for a better future. READ ALSO: Follow the LMSINT MEDIA channel on WhatsApp: Join Our WhatsApp Group Hear: Chat on WhatsApp Join our Telegram Chanel.
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Discover how the Naira’s continuous devaluation threatens Nigeria’s 2025 fiscal plan, with inflation, exchange rate fluctuations, and budgetary constraints creating significant challenges. Naira Depreciation Threatens Nigeria’s 2025 Fiscal Targets The sharp decline in the value of the Naira is setting up a challenging fiscal year for 2025, posing a significant threat to the Federal Government’s ability to fund its proposed budget. With a devaluation rate that has reduced purchasing power, experts warn that the N49.7 trillion budget presented by President Bola Tinubu may struggle to achieve the same impact as the N28.777 trillion budget of 2024. Struggles with Exchange Rates and Inflation The Central Bank of Nigeria’s (CBN) monetary policy reforms, aimed at stabilizing the currency, initially improved the Naira’s value but failed to sustain the gains. As of December 2023, the Naira traded at approximately N853 to $1. By December 2024, exchange rates surged to as high as N1,700 to $1, before settling at N1,536.93 to $1 on the CBN’s official platform. In addition to exchange rate volatility, inflation continues to rise. The 2024 inflation target was set at 21%, but the current rate stands at 34.6%. For 2025, President Tinubu aims to reduce inflation to 15%, though achieving this may prove difficult. Key Projections for the 2025 Budget President Tinubu’s 2025 budget, dubbed the “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” is built on several economic assumptions: The proposed expenditure of N49.7 trillion includes allocations to defense (N4.91 trillion), infrastructure (N4.06 trillion), health (N2.48 trillion), and education (N3.52 trillion). Debt servicing alone will require N15.81 trillion, while other expenditures account for N17.12 trillion. Challenges and Economic Achievements Despite challenges, President Tinubu highlighted some economic improvements during the 2024 budget presentation. Foreign reserves rose to $42 billion, and Nigeria’s economy grew by 3.46% in Q3 2024, up from 2.54% in Q3 2023. Additionally, the trade surplus hit N5.8 trillion, reflecting increased export activity. However, public sentiment remains cautious. The high “Japa” syndrome, where professionals emigrate due to economic hardship, underscores the challenges many Nigerians face. Critical sectors, such as healthcare and ICT, continue to experience significant brain drain. Will the 2025 Budget Deliver? The 2025 budget aims to restore peace and rebuild prosperity, but achieving these goals hinges on addressing macroeconomic issues like inflation and exchange rates. Without bold and effective reforms, the government risks falling short of its ambitious targets. By stabilizing the Naira and curbing inflation, the Federal Government could pave the way for a more sustainable economic future. Only time will tell if the “Budget of Restoration” will fulfill its promises or become another missed opportunity for economic growth. READ ALSO: Follow the LMSINT MEDIA channel on WhatsApp: Join Our WhatsApp Group Hear: Chat on WhatsApp Join our Telegram Chanel.
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Nigeria needs a minimum of $50 billion in foreign direct investment (FDI) to curb inflation to 5% by 2025, according to Ayo Teriba, a renowned economist and CEO of Economic Associates, Lagos. In an interview on Arise TV, Teriba emphasized that increasing the nation’s net reserves would be essential for stabilizing the economy and moderating macroeconomic conditions. This statement comes amid President Bola Tinubu’s goal of reducing inflation to 15% by 2025, a target that some economists believe may be difficult to achieve due to rising food and fuel prices. Teriba explained that with sufficient foreign capital inflows and expanded reserves, Nigeria could stabilize its exchange rate and drastically reduce inflation, which hit a 28-year high of 34.6% in November 2024. He stressed that substantial reforms are crucial to attract FDI that could transform Nigeria’s economy, which is currently struggling with various challenges. Teriba pointed to Argentina’s success in stabilizing inflation as an example of what’s possible with the right policies. To achieve this, Teriba proposed that the government focus on implementing tax and finance reforms alongside an investment act aimed at attracting $50 billion in FDI within the next year. This would help stabilize the exchange rate and push inflation to single-digit levels. In the third quarter of 2024, FDI into Nigeria increased by 248%, reaching $103.82 million, but this figure remains insufficient to stimulate the growth needed for a major economic turnaround. FDI had hit a record low in the second quarter of 2024, standing at just $29.8 million. Despite these challenges, Teriba argued that current economic policies, particularly those focused on debt servicing, are hindering the government’s ability to achieve its inflation goals. He criticized the practice of borrowing to pay off existing debt, noting that it doesn’t address Nigeria’s fundamental economic issues. “The interest rates offered to Nigeria by international creditors are among the highest in the world, primarily because of the country’s low credit rating. This makes borrowing an inefficient and unsustainable strategy,” Teriba said. He also urged a shift away from borrowing and recommended a move towards equity-based financing. Many countries with similar economies to Nigeria’s are able to borrow at significantly lower rates due to issuing higher-grade debt instruments. Teriba pointed out that while Nigeria has pledged to reduce borrowing, it continues to rely on loans, which is not an effective solution to its fiscal challenges. He called for a shift towards more strategic borrowing, emphasizing that debt instruments’ quality is crucial to lowering borrowing costs. “Many countries with economies comparable to ours borrow more than we do, but at a third of our rates. We should prioritize equity over debt to stabilize our finances,” he advised. Teriba concluded by urging the government to focus on structural reforms and creating incentives that would attract foreign capital. Without these changes, he warned, inflation would remain a persistent issue, undermining economic stability. “If we continue with high-interest borrowing and poor credit management, we’ll miss the opportunity to stabilize our economy. However, with bold reforms and attracting $50 billion in FDI, Nigeria could enter a new era of growth and stability,” he said. READ ALSO: Follow the LMSINT MEDIA channel on WhatsApp: Join Our WhatsApp Group Hear: Chat on WhatsApp Join our Telegram Chanel.
