KEY POINTS

• Fiscal stability is endangered by unrealistic budget assumptions.
• Food shortages, inflation and manufacturing problems are still very present
• Efforts have to be made urgently on the policy to mitigate the economic risks.

As Nigeria enters 2025, it does so under the spectre of severe poverty in the wake of another year ravaged by economic difficulties such as inflation, fuel scarcity and manufacturing downgrades.

Multiple systemic challenges, exacerbated by a lack of hope for any relief, are bound to push the economic strain on citizens further, experts point out.

Forecasting 2025 key economic challenges

1. The Unrealistic Budget Projections

However, crude oil production of 2.06 million barrels per day (mbpd) and an exchange rate of ₦1,400/$ in the 2025 budget is overly optimistic.

Production will likely average 1.5 mbpd, based on OPEC quotas and shifting global demand that will leave revenue targets untouchable.

2. Inflation Is Worsening, The Exchange Rate Becoming More Volatile

Ongoing fuel price instability and food shortages suggest that inflation will stay above 30 percent.

Further naira depreciation is anticipated with the rate seen reaching ₦1,700 – ₦1,800/$ by year end.

3. Fuel Scarcity and High Fuel Price Persist.

Even though expectations are that the domestic refineries such as Dangote and Port Harcourt would be able to stabilize fuel supply, prices are not likely to decline substantially due to high cost of production and inefficiencies of domestic refining.

4. Extracts of the Economy: Declining Manufacturing and Foreign Direct Investment (FDI)

Nigeria faces further manufacturing decline as major companies look to call it quits. This, combined with a lack of new FDI, threaten job creation and GDP growth.

5. Food Supply Crisis

But the shortage and rising prices of staples are still impeded by insecurity in key agricultural regions and climate induced disruptions to food production.

Implications for Nigerians

Increased Poverty: Even when put in place, the naira is too weak and inflation too high for the minimum wage will not take workers out of poverty.

Business Struggles: With rising borrowing costs and falling consumer purchasing power, small and medium enterprises will be hard pressed.

Energy and Infrastructure Deficits: Few improvements in power supply and transportation systems will further depress economic activities.

Outlook for policy solutions

This is another effort to stabilize the economy, which depends on solving systemic inefficiencies and by improving fiscal management.

But progress is likely to be limited by delays in passing critical tax bills and by resistance to reforms.