Tag: FX inflows

With Nigeria’s oil revenue underperforming, the surge in forex inflows is providing vital buffers for the economy. Central Bank of Nigeria-led reforms have attracted US$20.98 billion in foreign capital in the first ten months of the year. Experts say the development will strengthen FX liquidity, improve businesses’ access to foreign exchange, and signal a clear resurgence in investor confidence, with expectations of even greater inflows in the months ahead, reports Assistant Editor COLLINS NWEZE

The sustained growth in forex inflows into Nigeria’s economy reflects both financial sector stability and rising investor confidence in the domestic market. In the first ten months of 2025, foreign capital inflows reached US$20.98 billion, representing a 70% increase over total inflows for 2024 and a remarkable 428% surge compared to the US$3.9 billion recorded in 2023. This trend highlights growing interest in Nigerian assets from both domestic and global investors.

The uptick in capital inflows is closely linked to reforms introduced by the Central Bank of Nigeria (CBN) under Governor Olayemi Cardoso, who assumed office in October 2023. Prioritizing economic resilience and investment appeal, the CBN implemented policies aimed at rebuilding Nigeria’s financial buffers. Key measures included currency reforms, unification of exchange rates, and the clearance of over US$7 billion in FX backlogs. These initiatives improved transparency in the forex market, enhanced investor confidence, and positioned Nigeria as an attractive destination for capital.

The reforms have also drawn commendation from multilateral institutions such as the World Bank, which described the interventions as bold steps toward sustainable economic growth. Concurrently, Nigeria’s sovereign risk spread has fallen to its lowest level since January 2020, reversing premiums accrued during the pandemic and previous economic strains. CBN Governor Cardoso emphasised that the bank’s consistent unification of multiple exchange rate windows and the elimination of the multi-billion-dollar FX backlog have restored credibility to the market, enabling businesses to plan with confidence. The resulting surge in foreign capital inflows underscores a clear resurgence in investor trust, reflecting the effectiveness of deliberate policy measures aimed at sustaining economic growth and strengthening Nigeria’s financial stability.

Views from stakeholders

While US President Donald Trump’s widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa’s most-populous nation. “Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profit, and the stable naira. “We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.

“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc told Bloomberg. “Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he added.

The Nigeria’s economy and businesses will have so many things to cheer in 2025 and the impact of the economic reforms in FX market, exchange and huge budge outlays begin to pay off for them. Cardoso said story of Nigeria’s economic recovery cannot be appreciated without first recalling where “we started, because the reforms of today are borne out of a determination to change the conditions we met.” “When this leadership team assumed office, our economy faced severe macroeconomic distortions. Inflation was surging. FX liquidity had evaporated. External reserves were non-existent. Trust in economic management had weakened. Unorthodox monetary practices had eroded confidence. Businesses could not plan or price. Investors could not commit.”

Continuing, he said: “The foreign exchange market was in paralysis. A backlog of over US$7 billion in unmet FX obligations undermined market integrity. The spread between official and parallel market rates had blown out to more than 60%, creating distortions and rent‑seeking opportunities.

“High inflation had become normalised, stuck in double digits for most of the last 35 years and risen to 34.6 per cent as of November 2024. Food prices were crippling households. Liquidity conditions were unstable. Many businesses faced an existential threat.”

Also, the banking sector, though fundamentally sound, was at risk of being dragged into distress by a deteriorating macro environment and inconsistent policy signals. “This was the Nigeria we inherited, not one standing at the edge of a macroeconomic precipice, but one that had already gone over the cliff. It is important to recall this not for drama, but for context: the progress we cautiously acknowledge today is meaningful only when measured against the depth of the challenges that came before it,” he said.

Achieving economic turnaround

According to Cardoso, over the past 12 months, Nigeria’s economy has transitioned from crisis management to laying the groundwork for a sustainable recovery. “After nearly a decade in which real GDP growth averaged about two per cent, reforms have restored momentum and confidence in our broad macroeconomic environment. Our economy grew by 4.23 per cent in the second quarter of 2025, the strongest pace in four years, driven by improvements in telecommunications, financial services, and oil production.

“More importantly in terms of long-term stability, inflation, while still high, has moderated consistently. From a peak of 34.6% in November 2024, it has more than halved to 16.05 per cent in October 2025. This marks seven consecutive months of disinflation. Food inflation, the largest single component of the basket, fell to 13.12 per cent in October, down from 16.87 per cent in September and 21.87 per cent in August,” he said.

This significant, steady decline in inflation is restoring real purchasing power for households and businesses. It also demonstrates disciplined execution and Nigeria’s return to orthodox monetary policy. “We continue with determination to bring inflation down further. The current double-digit rate cannot be acceptable. Price stability is the foundation of sustainable growth. Our transition to an inflation‑targeting framework is gaining traction. We have improved data analytics, strengthened communication, and ended monetary financing of fiscal deficits. These actions have strengthened monetary policy transmission and anchored expectations.

“Our models project continued disinflation in 2026, helped by stronger domestic production, improved FX liquidity, and more disciplined liquidity management. As inflation moderates and becomes firmly anchored, we will calibrate the policy rate in line with evolving data,” he added.

“Domestic and international observers alike have noted Nigeria’s “huge turnaround” in macroeconomic management. Our commitment remains clear: monetary policy will stay evidence-based, data-driven, and unwavering in its pursuit of price stability”.

Bigger, stronger rebased GDP

Nigeria’s hope of achieving $1 trillion economy by 2030 will gain significant support from the banking sector. Nigeria’s Statistician-General, Adeyemi Adeniran, had explained how the economy fared in the rebased Gross Domestic Product (GDP) report. He said: “In nominal terms, the rebased GDP for 2019 stood at N205.09 trillion N213.63 trillion in 2020, N243.30 trillion in 2021, N274.23 trillion in 2022, N314.02 trillion in 2023, and N372.82 trillion in 2024.”

The NBS noted that in 2019, the rebased nominal GDP at basic prices represented an increase of 41.7 per cent over the nominal GDP of 2019 of the old base year (2010), 39 per cent in 2020, 38.7 per cent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023 and 35.4 per cent in 2024. “The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy than earlier reported,” the NBS boss said. Adeniran further explained that the rebasing allows the country to better reflect the realities of the economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.

Banking sector contributions

A well-recapitalised banking sector is undeniably crucial for the growth of the domestic economy. Hence, Cardoso advised banks to prepare for a new round of recapitalisation to ensure they have the necessary capital to support the Federal Government’s plan to achieve $1 trillion Gross Domestic Product (GDP) target by 2030. He said that President Bola Ahmed Tinubu’s economic plan aims to reach a $1 trillion GDP by 2030, emphasising that the current bank capitalisation is insufficient to support such a large economic scale.

Cardoso asked: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1 trillion economy in the near future? In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth.”

The Policy Advisory Council report on the national economy had set an ambitious goal of achieving a GDP of $1 trillion, with clearly defined priority areas and strategies. Adeniran revealed that incorporating new and emerging sectors, updating consumption baskets and refining data collection methods helped in producing a more complete picture of national output.

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Aliyu Ilias, developmental economist, noted that several sectors have previously remained un-captured in official data, particularly entertainment. “By rebasing our GDP now, included those areas properly. This new visibility will make Nigeria appear much stronger to foreign investors, which will naturally help us attract more capital,” he said.

He explained that the exercise will also reveal untapped economic potential and guide government resource allocation. “It will show where we are strongest structurally, such as in mining or other emerging sectors. That insight will help the government focus its efforts more strategically.” “Finally,” he added, “it will support economic policy formulation, helping us align our strategy with the reality on the ground. We will know exactly where to put more effort.”

Ilias explained that while this statistical adjustment does not instantly generate new revenue, it creates a more reliable framework for fiscal planning, investment strategies, and development interventions. For him, by aligning economic data with current realities, the government and private sector can more effectively target policies that stimulate job creation, improve productivity, and sustain long-term growth.

Seun Onigbinde, director of Civic Technology Group BudgIT, said the previous rebasing underscored the substantial impact of policy changes in the services and ICT sectors, such as telecommunications deregulation and banking sector recapitalisation. “Rebasing of the GDP must reflect changes in the economy, which are a product of public policies over time,” he added.

Rebasing is also critical for domestic policy. It allows the government to better assess tax collection efficiency, measure sectoral contributions, and design social programmes that are data-driven and results-oriented. Gabriel Okeowo, country director for BudgIT, said, “Rebasing allows planners to be more intentional about solving Nigeria’s biggest problems: poverty, infrastructure gaps, and job creation.”

Lagos-based economist, Nelson Adedeji, explained that despite the bump in GDP size, the rebasing is never a silver bullet. “We must acknowledge that genuine economic growth extends beyond statistical adjustments. For ordinary Nigerians to experience meaningful improvement in living standards, the President Tinubu administration must complement GDP rebasing with substantive policies addressing infrastructure deficits, security challenges, agricultural productivity, manufacturing capacity, and the overall ease of doing business,” he stated.

The naira is expected to remain stable, supported by improved foreign exchange (FX) liquidity and a more efficient FX market. Analysts anticipate continued inflows from foreign portfolio investors (FPIs), driven by growing market confidence. In addition, rising non-oil exports and limited opportunities for naira speculation are likely to sustain steady domestic inflows, reports Assistant Editor COLLINS NWEZE

The long-term stability of the naira is increasingly being projected, supported by rising foreign capital inflows and a significant boost in Nigeria’s foreign exchange reserves. Over the past week alone, the naira appreciated by 1.1 per cent to N1,520.00/$, driven by the Central Bank of Nigeria’s (CBN) intervention of $50 million and heightened interest from Foreign Portfolio Investors (FPIs) following a successful Open Market Operation (OMO) auction.

Dr. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), emphasized that with consistent foreign exchange inflows, the naira’s long-term stability appears increasingly assured. Recent data from the National Bureau of Statistics (NBS) revealed that capital inflows reached $5.6 billion in Q1 2025, a clear indication of renewed investor confidence. The banking sector attracted $3.1 billion—representing 55.44 per cent of total inflows—highlighting the positive impact of reforms implemented by the CBN to attract both local and foreign investors.

Analysts at Cordros Securities echoed this optimism, pointing out that Nigeria’s gross external reserves have now climbed to their highest level since December 2021. Reserves increased by $353.47 million in one week to reach $41.08 billion on August 21, and further edged up to $41.10 billion by August 22. Earlier in the month, reserves stood at $40.72 billion as of August 13, largely fueled by rising FX inflows and a modest uptick in crude oil production.

CBN data also showed a consistent upward trend in reserve levels: from a daily average of $39.3 billion on August 1, to $39.5 billion by August 6, and then $40.2 billion on August 8. These gains have coincided with positive macroeconomic indicators. Inflation has continued to decline, closing July at 21.88 per cent, while global commodity prices are moderating. The ongoing fiscal and monetary reforms—led by CBN Governor Olayemi Cardoso—are credited with driving FX market liberalization, improving transparency, and boosting local production.

Dr. Gwadabe noted that the CBN has been diversifying FX sources to increase dollar supply and improve access for both manufacturers and retail users. The outlook remains optimistic, with expectations that the apex bank will maintain its reform momentum while fiscal authorities deepen efforts to boost FX earnings from oil, gas, and non-oil exports. “From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain,” he said.

How it started

 The Central Bank of Nigeria (CBN), under the leadership of Governor Olayemi Cardoso, has implemented a series of bold reforms aimed at attracting foreign capital, stabilizing prices, and strengthening the naira. These reforms, in coordination with broader fiscal measures by the federal government, have marked a significant turning point for Nigeria’s economic trajectory.

In 2023, the new administration initiated sweeping changes to reposition the economy. These included the liberalization of the foreign exchange market, the discontinuation of CBN financing of the fiscal deficit, and the full deregulation of fuel subsidies. At the same time, the government undertook measures to strengthen revenue mobilization and tackle the rising inflation rate through targeted fiscal discipline.

Since the rollout of these reforms, Nigeria’s international reserves have witnessed a notable increase, and access to foreign exchange through the official market has significantly improved. For the first time in years, both individuals and businesses can access forex transparently, without depending solely on parallel market channels.

These efforts have restored investor confidence. Nigeria successfully returned to the international capital markets in December 2024 and has since received credit rating upgrades from major global agencies. A major milestone in this economic reset is the launch of a large-scale domestic private refinery, which is expected to move Nigeria higher up the oil and gas value chain and enhance self-sufficiency in a deregulated market.

CBN’s currency and forex reforms have also triggered renewed foreign investment inflows, while reducing the need for constant interventions in the forex market. The unification of multiple exchange rates and the clearance of the over $7 billion backlog of unmet forex obligations have been described by multilateral institutions, including the World Bank, as bold and necessary steps toward long-term economic sustainability.

These interventions have positively impacted Nigeria’s global risk profile. The country’s sovereign risk spread has dropped to its lowest point since January 2020, effectively erasing much of the premium built up during the COVID-19 pandemic and subsequent economic disruptions.

Altogether, these deliberate reforms by both the CBN and the federal government are part of a larger strategy to stabilize the macroeconomic environment, restore investor confidence, and ensure steady capital inflows essential for long-term growth and resilience.

More foreign capitals flow in

 According to the latest “Nigeria Capital Importation Q1 2025” report released represents 10.86 per cent surge from the $5.1 billion reported in fourth quarter of 2024. “In Q1 2025, total capital importation into Nigeria stood at US$5642.07 million, higher than $3.37 billion recorded in Q1 2024, indicating an increase of 67.12  per cent. In comparison to the preceding quarter, capital importation increased by 10.86 per cent from $5.08 billion in Q4 2024,” the report stated.

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The NBS also stated that portfolio investment ranked top with $5.2 billion, accounting for 92.25 per cent, followed by other investment with $311.17 million, accounting for 5.52 per cent. The report indicated that, “Foreign Direct Investment recorded the least with $126.29 million accounting for 2.24 per cent of total capital importation in Q1 2025.”

According to the NBS, the banking sector took the lead with the highest inflows in Q1 2025. The report stated, “The Banking sector recorded the highest inflow with $3.1 billion, representing 55.44 per cent of total capital imported in Q1 2025, followed by the Financing sector, valued at $2.09 billion (37.18 per cent), and Production/Manufacturing sector with $129.92 million (2.30 per cent).”

The report further noted that capital importation during the reference period originated largely from the United Kingdom with $3681.96 million, showing 65.26 per cent of the total capital imported. In emailed note to investors, Managing Director, Afrinvest West Africa Limited, Ike Chioke, explained that Portfolio Investment (92.2 per cent of total capital) dominated flows, rising by 30.1 per cent quarter-on-quarter,  and 150.8 per cent year-on-year to $5.2 billion. The bulk of the FPI flows was to Money market instruments (up 162.2 per cent year-on-year to $4.2 billion), while Bonds (up 108.5 per cent) and Equities (up 137.7 per cent) attracted $877.4 million and $117.3 million respectively.

Opportunities in GDP numbers

 Nigeria’s hope of achieving $1 trillion economy by 2030 will gain significant support from the banking sector. Nigeria’s statistician-general, Adeyemi Adeniran, had explained how the economy fared in the rebased Gross Domestic Product (GDP) report. He said: “In nominal terms, the rebased GDP for 2019 stood at N205.09 trillion N213.63 trillion in 2020, N243.30 trillion in 2021, N274.23 trillion in 2022, N314.02 trillion in 2023, and N372.82 trillion in 2024”.

The NBS noted that in 2019, the rebased nominal GDP at basic prices represented an increase of 41.7 per cent over the nominal GDP of 2019 of the old base year (2010), 39 per cent in 2020, 38.7 per cent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023 and 35.4 per cent in 2024.

“The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy than earlier reported,” the NBS said.

Adeniran further explained that the rebasing allows the country to better reflect the realities of the economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.

How the banks stand

 A well-recapitalised banking sector is undeniably crucial for the growth of the domestic economy. Hence, Olayemi Cardoso, Central Bank of Nigeria (CBN) governor, advised banks to prepare for a new round of recapitalisation to ensure they have the necessary capital to support the Federal Government’s plan to achieve $1 trillion Gross Domestic Product (GDP)  target by 2030.

He said that President Bola Ahmed Tinubu’s economic plan aims to reach a $1tr GDP by 2030, emphasising that the current bank capitalisation is insufficient to support such a large economic scale. Cardoso asked: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1tr economy in the near future? In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth.”

The Policy Advisory Council report on the national economy, had set an ambitious goal of achieving a GDP of $1 trillion, with clearly defined priority areas and strategies. Adeniran revealed that incorporated new and emerging sectors, consumption baskets update, and data collection refining methods helped produce a more complete picture of national output.

Aliyu Ilias, developmental economist, noted that several sectors have previously remained uncaptured in official data, particularly entertainment. “By rebasing our GDP now, included those areas properly. This new visibility will make Nigeria appear much stronger to foreign investors, which will naturally help us attract more capital,” he said.

He explained that the exercise will also reveal untapped economic potential and guide government resource allocation. “It will show where we are strongest structurally, such as in mining or other emerging sectors. That insight will help the government focus its efforts more strategically.”

“Finally,” he added, “it will support economic policy formulation, helping us align our strategy with the reality on the ground. We will know exactly where to put more effort.”

More so,  while the US President Donald Trump’s widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa’s most-populous nation. “Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profit, and the stable naira.

“We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.

“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc told Bloomberg.

“Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he said.

Going forward, the CBN anticipates a steady uptick in reserves, underpinned by improved oil production levels, and a more supporting export growth environment expected to boost non-oil FX earnings and diversify external inflows. The CBN remains committed to prudent reserve management, transparent reporting, and macroeconomic policies that support a stable exchange rate, attract investment, and build long-term resilience.

Price and exchange rate stability are key roles of the Central Bank across the world. The drop in Nigeria’s inflation rate in May has been attributed to changes in macroeconomic dynamics as well as monetary-fiscal policies alliance.  Analysts view the moderation in May’s headline inflation at 22.97 per cent as a positive outcome of improved FX stability, easing energy prices, and a slowdown in money supply growth, writes Assistant Editor COLLINS NWEZE

The drop in Nigeria’s inflation rate for May 2025 was not accidental—it was the result of deliberate and sustained monetary policy reforms by the Central Bank of Nigeria (CBN). Key among these were stabilising the foreign exchange market, strengthening the naira, and tightening liquidity to curb excess money supply. According to the National Bureau of Statistics (NBS), the inflation rate eased to 22.97 per cent in May, down from 23.71 per cent in April, marking a clear signal of policy impact.

Broad money (M2) growth also moderated significantly, averaging 1.3 per cent month-on-month and 20.3 per cent year-on-year in 2025, compared to 5.6 per cent and 75.5 per cent respectively in 2024. The CBN’s latest quarterly economic report for Q4 2024 shows strong FX inflows—$61.2 billion net, up 99 per cent year-on-year—with gross inflows up 21 per cent quarter-on-quarter to $27.8 billion. FX outflows also rose by 31 per cent to $10.4 billion.

Like other central banks globally, the CBN has remained laser-focused on inflation. Its adoption of an inflation-targeting framework and the tightening of the Monetary Policy Rate to 27.5 per cent are strategic tools to restore macroeconomic stability and reinforce investor confidence.

Naira appreciates and how inflation works

 Specifically, the naira appreciated by 0.7 per cent month-on-month, closing at N1,586.15/$1.00. Additionally, prices in the energy sector declined by 0.4 per cent month-on-month in May. The monthly energy deflation was likely supported by reductions in Premium Motor Spirit (PMS) prices by Dangote Petroleum Refinery (and select independent marketers) which brought ex-depot prices down to a range of N875.00 to N905.00/litre across states and regions.

In emailed report to investors, Managing Director, Afrinvest Nigeria Limited, Ike Chioke, stated that

while the positive strides in consumer price dynamics (especially core inflation) could set the stage for a potential rate cut by the MPC in second half of this year, persistent risks in the food sector – stemming from agrarian and structural factors – are potent headwinds ahead. According to the report, sustained currency appreciation and the lagged impact of PMS price cuts in late May are likely to counteract the impact of holiday-induced price hikes in some core items and keep the sub-component inflation modest.

Inflation remains one of the most discussed yet misunderstood economic concepts. Economists generally agree that inflation refers to a sustained increase in the general price level of goods and services over time. It is typically measured using indicators such as the Consumer Price Index (CPI) or the implicit price deflator for Gross National Product (GNP). A commonly used expression for inflation is “too much money chasing too few goods,” highlighting how increased money supply can outpace output, thereby weakening a currency’s purchasing power. When inflation occurs, money buys fewer goods. For example, if N10.00 buys 10 shirts today, but prices double, that same amount will only buy five shirts—demonstrating a clear decline in real value.

Recent macroeconomic signals offer cautious optimism. A slowdown in food prices and a 7% dip in petrol costs are notable, alongside positive feedback from the GDP rebasing exercise. These developments hint at an improving inflation trajectory. According to Bismarck Rewane, CEO of Financial Derivatives Company Limited, a stronger oil sector could drive more stable fuel prices and higher government revenues, enhancing economic stability.

The Economic Intelligence Unit (EIU) forecasts a 4% rebound in retail sales in 2025, with consumer spending expected to rise to $127 billion. Input from monetary authorities has also contributed to cooling inflation. Charlie Bird, Director of Trading at Verto, noted that rising crude oil prices, FX stability in NAFEM, narrow parallel market spreads, and growing reserves all point to positive inflation outcomes—signaling stronger prospects for economic recovery and price stability.

Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said positive impact of CBN’s reforms has continued affect the market and economic indicators positively. Also, inflation targeting framework, which replaces the exchange rate targeting framework, aligns with the apex bank’s determination to bring inflation upsurge under control  in line with its price stability mandate.

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Analysts said the various oil price shocks, Covid-19 pandemic, and most recently, the war between Russia and Ukraine, and Israel and Iran have resulted in various shocks to the global economy, requiring changing responses to subdue the monetary and fiscal authorities in the advanced and emerging market economies.

How low inflation supports economy

The Comercio Partners, in its 2025 macroeconomic outlook, highlighted that the rebasing of Nigeria’s Consumer Price Index (CPI) to 2024 would also create statistical effects that could lower inflation figures. From the stabilisation of exchange rates, the normalisation of energy prices following the subsidy removal to improved liquidity in the forex market, the economy has what it takes to achieve price stability within the year.

The Comercio Partners reports emphasised the importance of local refining capacity expansion, particularly with the launch of the Dangote Refinery. This development is expected to reduce the impact of exchange rate fluctuations on energy prices. By relying more on domestically refined petroleum, Nigeria is likely to see a reduction in energy price volatility.

This, combined with a more stable exchange rate, is expected to lower production and transportation costs, creating a positive ripple effect throughout the broader economy. According to Ifeanyi Ubah, head of investment research and global macro strategist, “We expect headline inflation to decrease to around 15 percent in the first half of 2025, indicating a gradual return to economic stability.”

The report also emphasised the importance of local refining capacity expansion, particularly with the launch of the Dangote Refinery. This development is expected to reduce the impact of exchange rate fluctuations on energy prices. By relying more on domestically refined petroleum, Nigeria is likely to see a reduction in energy price volatility. This, combined with a more stable exchange rate, is expected to lower production and transportation costs, creating a positive ripple effect throughout the broader economy.

In its efforts to tame inflation, the CBN recently hosted the Monetary Policy Forum 2025, featuring fiscal authorities, legislative, private sector, development partners, subject-matter experts, and scholars with the theme: “Managing the Disinflation Process.” The forum is a major push to improve monetary policy communication, foster dialogue, and collaborate on critical issues shaping monetary policy.

During the event, CBN Governor, Olayemi Cardoso, explained that the apex bank’s focus is to sustain price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship. He said the apex bank is continuing its disciplined approach to monetary policy, aimed at curbing inflation and stabilising the economy.

“These actions have yielded measurable progress: relative stability in the FX market, narrowing exchange rate disparities, and a rise in external reserves to over $40 billion as of December 2024.”

Cardoso reiterated that the goal of the CBN is to ensure that monetary policy remains forward-looking, adaptive, and resilient. In addressing our economic challenges, collaboration is key: “Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” Cardoso said.

“Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship,” he added.

The CBN also focused on strengthening the banking sector, introducing new minimum capital requirements for banks (effective March 2026) to ensure resilience and position Nigeria’s banking industry for a $1 trillion economy. These reforms and developments reflect the Bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.

“As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” Cardoso stated. He said moving from the exchange rate targeting framework to the inflation targeting framework aligned with the apex bank’s determination to bring inflation upsurge under control in line with its price stability mandate.

Inflation uptick has remained a major concern to the CBN and is the time to use monetary policy tools to control it. Already, the data from the National Bureau of Statistics (NBS) showed that Inflation Rate i n Nigeria increased to 34.80 per cent in December from 34.60 percent in November of 2024. Inflation Rate in Nigeria is expected to be 32.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations.

Market data showed that the various oil price shocks, Covid-19 pandemic, and most recently, the war between Russia and Ukraine, have resulted in various shocks to the global economy, requiring changing responses to subdue the monetary and fiscal authorities in the advanced and emerging market economies. To address these shocks, the CBN plans to migrate from an exchange rate targeting framework to phased migration and now inflation targeting framework. The CBN has been controlling the growth of money supply to achieve price stability, but is seeking a change of strategy to achieve better results.

World Bank growth projection

The World Bank recently gave a positive verdict on Nigeria’s economic growth trajectory, highlighting three-year unbroken growth for the country. In the bank’s Global Economic Prospects for June, the bank posited that Nigeria will have three-year unbroken growth records- growing at 3.6 per cent in 2025, 3.7 per cent in 2026 and 3.8 per cent in 2027. The World Bank, however, slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3 per cent, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.

In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70 per cent of all economies – including the United States, China and Europe, as well as six emerging market regions – from the levels it projected just six months ago before U.S. President Donald Trump took office. The bank stopped short of forecasting a recession but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5 per cent, the slowest pace of any decade since the 1960s. The bank said global inflation was expected to reach 2.9 per cent in 2025, remaining above pre-COVID levels, given tariff increases and tight labour markets.