2024 may go down in history as the year Nigerians endured the worst cost of living crisis in decades. The naira lost 40 per cent of its purchasing power and plunged consumers into abysmal standard of living caused by spiraling inflation.
However, there are strong indications that things are looking up and that there will be relief in 2025. Economy watchers contend that the naira will stabilise during the year and set inflation in a modest retreat that will stabilise prices of commodities.
Pundits predicate their optimistic projection for 2025 on a number of factors that will stabilise the exchange rate of the naira and halt the spiraling inflation that depleted the purchasing power of the naira.
The first factor is Nigeria’s attainment of self-sufficiency in refined petroleum products. The emergence of Dangote Refinery with capacity for 650,000 barrels of crude oil per day has not only made Nigeria self-sufficient in refined petroleum products but also a key exporter of refined products.
Besides the Dangote Refinery overwhelming capacity in the downstream sector of the oil industry, the old Port Harcourt Refinery resumed the refining of crude oil one month ago. Nigeria’s self-sufficiency in refined petroleum products was further consolidated last week with the resumption of the refining process by the Warri Refinery with capacity for 120,000 barrels of crude oil per day.
The development in the downstream sector of the oil industry will benefit Nigeria’s economy from two ends. First, it will conserve the $20 billion spent annually on refined petroleum products imports. The second gain is that it will plough more foreign exchange into Nigeria’s reserves.
Aliko Dangote, president of the Dangote conglomerate, said last year that his refinery and the petrochemical plant attached to it will be earning $15 billion annually from products exports.
That will automatically improve Nigeria’s foreign exchange earning capacity at a time when demand will be drastically reduced by self-sufficiency in refined petroleum products.
The second reason for the optimistic economic projections for 2025 by economy watchers is Nigeria’s improved rating by foreign direct investors.
Foreign direct investors have accepted the removal of petrol subsidy by the federal government and the floating of the naira as necessary evils that will plough more funds into government coffers for the rehabilitation of decaying infrastructure to reduce the cost of doing business.
Consequently, the inflow of foreign direct investment started improving in the second half of 2024. Pundits expect the inflow to be higher in 2025. Consequently, the projection is that Nigeria’s foreign reserves will bounce back considerably.
Foreign investors’ confidence in the federal government’s economic reforms was demonstrated in the closing days of November 2024 when the federal government’s $2.2 billion Euro Bond was oversubscribed by a whopping $9 billion.
Besides, there are strong indications that the federal government is making some headway in the war against crude oil thieves.
Though the war is yet to be won, there is significant improvement in crude oil production as it has risen from an abysmal 1.3 million barrels per day in the first quarter of 2024 to 1.8 million barrels per day at the end of the year.
The gains from the war against oil thieves could be seen in the nation’s foreign reserves which leisurely crossed the $40 billion benchmark for the first time in decades.
All these add up to the projection that Nigeria will almost certainly overcome its devastating foreign exchange supply deficit and stabilise the exchange rate of the naira for the onslaught against inflation.
Another crucial factor that will eventually lead to success in the war against inflation is the declining pump price of petrol as Nigeria consolidates its self-sufficiency in refined petroleum products. The Independent Petroleum Marketers Association of Nigeria (IPMAN) said last week that with Dangote Refinery, now joined in the fray by Port Harcourt and Warri refineries, they foresee a situation where the pump price of petrol could drop below N500 per liter in 2025.
The marketers contend that competition will drastically drop the price of petrol as the federal government agrees to sell crude oil to local refiners in naira.
Blueprint is excited by the optimistic economic projections for 2025. However, we believe that the federal government must take the war against inflation to the door steps of retailers, greedy market unionists and the cruel members of the National Union of Road Transport Workers (NURTW) if this projection must be realised.
Consumers pay N5,000 levy to market union members for a bag of plantain they buy for N15,000 in the market. Petrol price has dropped almost by N200 per liter but NURTW maintains the fare hike it imposed when petrol price rose in September 2024.
They must be forced to allow market forces to determine fares and prices.