In a breakfast meeting held by Financial Derivatives Company at the Lagos Business School on February 5, 2025, two major strategic options were laid out for Nigeria, going forward in 2025 and beyond.
The first strategic option is: A breakthrough in Nigeria in 2025 would represent the country’s ability to overcome deep-rooted challenges and emerge stronger and more successful.
The second strategic option is: A fall through in Nigeria in 2025 would represent the country sinking deeper into its challenges without sufficient mechanisms or opportunities to recover.
These options were based on critical analysis of the global dynamics that are currently playing out, the Nigerian economy, market situation, aviation and tourism including creative economy and finally political updates and outlooks.
FDC’s Global Outlook includes the following:
Donald Trump as a deporter of immigrants from the US, disruptor of institutional structures and deviant against established rules; caught between the Monroe doctrine and global trade, isolationism and globalization; his transactional approach to geopolitics which include bullying as a bargaining tool and thus alienating most allies and irritating the foes.
The geopolitical strategy is to de-escalate areas of global tension, bring down commodity prices and enhance the value of the U.S. dollar
At the other end of the pole, for example is that the new Chinese DeepSeek AI response is a fraction of America’s Meta Llama 3.1 and OpenAI production costs which puts Silicon Valley at a cost disadvantage where, for instance, US tech companies have lost over $1trn in one day led by Nvidia which lost 17% of its market capitalization
• Negotiating as a bully from a position of strength with 95% of economists believes that tariffs will cause inflation.
• The separation of powers means barking most times but not biting all the time with probably high possibility of falling into a lame duck status prematurely with mid–term elections possibly becoming the underbelly of the Republican Party
While US has trade relations with over 150 countries, regions, and economic blocs, US at the same time is the world’s 2nd-largest trading nation, behind China but with China imposing tariffs on the US goods, effective from Feb. 10
Trump has meanwhile delayed tariff implementation for 30 days for Canada and Mexico while the North American Free Trade Agreement (NAFTA) integrated the US, Canada, and Mexico supply chain is being subjected to review.
Other geopolitical dynamics include ceasefire in Gaza expected to reduce oil prices while truce in Ukraine is expected to reduce global commodity prices
Meanwhile, the Chinese are fighting on multiple fronts: intellectual property, trade war, competitive devaluation and influence in Africa and emerging markets
For the continent of Africa, the FDC meeting says that Trump could be the trigger that Africa needs to move forward noting that Africa is a continent of more people, less output. Africa accounts for 30% of global natural resource endowment and 18.6% of global population but only 2.4% of global output. Therefore, to be resilient, Africa must prioritize productivity growth and leverage the AfCFTA
Within this context, the meeting believes Nigeria could play a catalytic role on behalf of Africa because Nigeria’s trade with the U.S is valued at $8bn (Q3’2024); Nigeria buys wheat and military hardware from the US. There is a greater opportunity now to build a resilient domestic economy and reverse the Japa syndrome.
Nigeria’s Macroeconomic Snapshot – Q1’25
GDP growth(%) 3.8* (Q4’24) 3.6 (Q1’25) registering -0.2% (the reason for this is that GDP growth to decline due to reduced post-festive spending and the typical lull in agricultural activities)
Inflation (%) – end period 34.8 (Q4’24) 33.12 (Q1’25) registering -1.68 %(supported by the basket reconstitution and a stable naira)
Exchange rate, official (end period) 1,535 (Q4’24) 1,400 (Q1’25) registering 9.4%) (sustained CBN interventions to support the naira)
Stock market capitalization (N’trn) 62.76 (Q4’24) 65.45 (Q1’25) registering 4.29% (A stable interest rate environment to bolster stock market performance).
PMI 52.7 (Q4’24) 53.0 (Q1’25) registering 0.57% (Lower inflation and stable interest rates to improve business activities).
MPR (%) 27.25 (Q4’24) 27.25 (Q1’25) registering 00.00% (Lower inflation and positive real GDP growth will reinforce the MPC’s decision to maintain a status quo).
Gross External reserves ($bn) 40.88 (Q4’24) 42.20 (Q1’25) registering 3.23% (Higher oil production will boost export earnings).
Crude oil production (mbd) avg. 1.43 (Q4’24) 1.48 (Q1’25) registering 3.50% (Sustained efforts by the government to tackle oil theft and pipeline vandalism).
Crude oil price ($/bpd, avg) 73.94 (Q4’24) 75 (Q1’25) registering 1.43% (Trump’s tariffs could cause potential disruptions in crude supply from Canada and Mexico, the two largest oil suppliers to the US).
Trade balance (N trn) 5.81 (Q4’24) 4.93 (Q1’25) registering -15.15% (A possible extension of the import duty waiver will increase imports and in turn, reduce the positive trade balance).
The meeting noted that the market structure in Nigeria’s oil industry has transitioned from monopoly to oligopoly and is moving toward a more competitive market.
It also noted that the price of PMS is buoyed by global oil prices, logistics cost and exchange rate.
In the power sector, the meeting noted that Nigeria is still generating 5000MWs with increased national grid collapses increased but less during harmattan and low temperatures. The highest monthly grid collapse was recorded in November 2024 (4 times)
The focus remains on improving the electricity supply through better services and infrastructure
If another tariff hike is implemented it will lead to high electricity costs from approximately ₦116.18 to ₦193.63 per kilowatt-hour; increasing living costs and potential energy poverty for many Nigerians.
The average electricity output remained lower than the installed capacity with transmission network being the key bottleneck, driven by rising pressure from increased company production ahead of the festive season coupled with seasonal variations.
- Alex Ekemenah