The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has outlined key economic priorities for 2025, focusing on foreign exchange (FX) stability, inflation moderation, and economic recovery through coordinated fiscal and monetary policies.
At its first MPC meeting of 2025, the apex bank reviewed recent policy interventions that have driven positive macroeconomic outcomes, including exchange rate convergence, increased investor confidence, and GDP growth. However, inflation remains a major challenge, and structural constraints persist.
FX Market Stability and Exchange Rate Convergence
A major highlight of the meeting was Nigeria’s improved FX market stability. Policy interventions, such as the introduction of the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code, have narrowed the gap between the official and parallel market rates.
Financial expert Bismarck Rewane noted on Arise TV that the difference between the official and parallel market rates has dropped to less than 1%, a significant improvement from previous gaps as high as 10-20%.
As of February 2025, the Naira traded at ₦1,503.63 per dollar in the official market and ₦1,500.00 in the parallel market, reflecting increased market stability. However, a Purchasing Power Parity (PPP) analysis suggests the Naira remains undervalued by 26.35%, indicating room for further realignment.
Inflation Pressures and Policy Response
Despite FX stability, inflation remains a concern, with the National Bureau of Statistics (NBS) reporting a headline inflation rate of 24.48% in January 2025. Food inflation stood at 26.08%, while core inflation was 22.59%, driven by high import costs, insecurity, and supply chain disruptions.
Economic analysts, including Umeje Chukwuma, argue that insecurity, logistical challenges, and climate-related issues are key drivers of food inflation. Many experts have urged the federal government to strengthen security efforts to attract foreign direct investment (FDI) and stabilize food prices.
The CBN has responded by adjusting the Monetary Policy Rate (MPR) and enhancing monetary policy transmission mechanisms, but experts stress the need for better fiscal-monetary coordination to curb inflation effectively.
Oil Production, External Reserves, and Investment Outlook
Higher oil production levels (1.54 million barrels per day as of January 2025) have strengthened Nigeria’s external reserves, which now stand at $39.4 billion, covering 9.6 months of imports. This has boosted investor confidence and is expected to increase FDI, portfolio inflows, and diaspora remittances.
Nigeria’s trade balance has also improved, with a $6.06 billion current account surplus as of Q3 2024, reflecting reduced import dependence and rising export earnings.
GDP Growth and Economic Diversification
Nigeria’s GDP grew by 3.84% year-on-year in Q4 2024, up from 3.46% in Q4 2023, with the services sector leading at 5.37% growth and contributing 57.38% to GDP.
Experts, including Dr. Ayo Teriba, believe that non-oil sector diversification, particularly in technology, fintech, and telecommunications, is yielding results. However, infrastructure deficits, power supply issues, and oil market fluctuations pose risks to long-term stability.
Key Takeaways and Policy Recommendations
While CBN-led reforms have stabilized FX markets and improved economic indicators, experts caution that sustained policy efforts are necessary to consolidate these gains.
Key recommendations include:
- Strengthening fiscal-monetary coordination to effectively tackle inflation.
- Addressing insecurity to unlock agricultural productivity and attract investments.
- Sustaining FX market reforms to maintain investor confidence.
- Encouraging domestic and foreign investments through a more business-friendly environment.
With the right mix of policy consistency and strategic planning, analysts believe Nigeria can build on its economic progress and achieve long-term stability.
