A Devastating Year For Nigeria: Economist Warns Government To Get Policies Right In 2025

A Devastating Year For Nigeria: Economist Warns Government To Get Policies Right In 2025

2024 brought significant hardship to Nigerians, affecting both the rich and poor. Many families struggled to provide basic necessities, with widespread hunger, soaring transportation costs, expensive healthcare, and rampant inflation. President…A Devastating Year For Nigeria: Economist Warns Government To Get Policies Right In 2025

Tinubu, in a media interview, expressed that his policies were designed to put the nation on a path of growth.

Acknowledging the dire situation, Tinubu shared that even some of his wealthier friends had sold their Rolls-Royce cars. ireporteronline spoke with Dr. Fabian Philip Onunaku, an Associate Professor, financial expert, business economist, and strategic management specialist, to discuss the economic challenges of 2024, the Central Bank of Nigeria’s (CBN) policies, the 2025 budget, and the economic outlook for the New Year. He also offered suggestions for reducing the hardships faced by citizens.

Policies that Worsened 2024

Onunaku pointed out that President Tinubu’s decision to remove subsidies and the floating of the naira currency, without fully considering their potential impact, contributed significantly to the challenges faced in 2024. Although these policies were enacted in 2023, he argued that they were poorly timed, especially given Nigeria’s reliance on imports. He explained that currency devaluation would typically benefit export-heavy countries, but Nigeria’s economy is largely import-dependent.

Onunaku explained: “Economically, 2024 has been particularly tough for most Nigerians, particularly with the shrinking middle class and the concentration of wealth in the hands of the top 2 percent. The sudden removal of the petroleum subsidy in May 2023 and the transition to a floating exchange rate system worsened the situation. For a country heavily reliant on imports, the naira’s depreciation was disastrous. A cheaper currency should make exports more competitive, but our industrial sector is nearly dormant, and we rely predominantly on crude oil exports for foreign exchange earnings.”

He continued, “The subsidy removal, despite its flaws, led to massive price hikes in petroleum products. With power supply issues affecting businesses, both large and small, this created a ripple effect on inflation, which surged to nearly 40 percent. Widespread flooding and insecurity have left us increasingly dependent on food imports, further driving up costs. This is why food inflation is at record levels. The new minimum wage of N70,000 cannot even cover the cost of a 50kg bag of rice, let alone other essential goods. Desperation and hunger are rampant.”

The 2025 Budget: A Hopeful Outlook?

Onunaku expressed skepticism about the 2025 budget, fearing it would not deliver the hope Nigerians are yearning for. He highlighted concerns such as debt servicing, the nation’s dependence on crude oil, oil theft, and the challenges of meeting OPEC quotas.

He remarked: “The 2025 budget is ambitious, with about ₦48 trillion allocated, of which 35% is earmarked for debt servicing. The government aims to generate ₦35 trillion in revenue, yet even with tax reforms, it remains uncertain how this will be achieved. The target of producing 2.05 million barrels of crude oil per day in 2025 seems unrealistic, given that we have struggled to meet our OPEC quota of 1.8 million barrels per day in recent years.”

Onunaku pointed out that Nigeria has faced challenges in funding the 2024 budget of ₦28 trillion, and OPEC’s production cuts could further hinder the country’s oil revenue.

A Gloomy 2025 Unless There Are Changes

Onunaku warned that Nigeria’s economic future could remain bleak unless drastic steps are taken. He stressed the need for the country to transition from a consumption-driven to a production-driven economy, especially in manufacturing and agriculture. However, he expressed concerns that the 2025 budget allocates more resources to luxury items rather than addressing the real needs of the economy.

He questioned the government’s decision to allocate more funds for luxury cars for officials while there were calls to reduce government expenses. “The focus should be on stimulating production, but how can we do this when power supply and capital formation remain issues? Instead of focusing on importing luxury items, we should be investing in our local industries.”

The Path Forward for Nigeria

With over 30 years of experience in economic development, Onunaku proposed that agriculture could be the key to turning Nigeria’s fortunes around in 2025. He called on both federal and state governments to declare a state of emergency on food security by addressing issues such as insecurity, flooding, and the underutilization of the youth population.

He stated: “Agricultural productivity is low due to insecurity, flooding, and other environmental challenges. The government should establish mega farms, provide security, and employ unemployed youth and displaced farmers. This could help tackle both unemployment and food insecurity. We also need to focus on flood control, especially in the rainy season.”

CBN’s Monetary Policy Won’t Solve Inflation

Onunaku also expressed doubt that the Central Bank of Nigeria’s current monetary policy could effectively address inflation. He argued that raising interest rates would typically help reduce inflation, but in Nigeria’s case, it is not enough due to the unique challenges the country faces, such as high import dependency and insecurity affecting food production.

He explained: “CBN’s policy of tightening the money supply by raising interest rates is ineffective because it doesn’t address the core issues of inflation. The inflation we are seeing is not just due to excess money supply; it is a result of food shortages, insecurity, and the depreciation of the naira, which affects the prices of imported goods.”

Onunaku concluded by urging the CBN to find ways to strengthen the naira and boost local production to alleviate inflation. He emphasized the importance of increasing exports, reducing oil theft, and revitalizing the industrial sector to stabilize the economy.

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