As 2025 opened, it became quickly apparent that the global economy was entering yet another period of uncertainty. The familiar spectre of protectionism reared its head once again, as the Trump administration—returning to office with its signature bravado—announced a fresh salvo of tariffs. Markets wobbled, trade tensions spiked, and business sentiment soured in several quarters. And yet, in a twist that defied conventional economic playbooks, global inflation cooled in Q1, offering an unexpected reprieve to central banks that had spent much of the past two years fighting stubborn price pressures.
In most advanced economies, this easing of inflation might have signalled room to pivot to a more accommodative monetary stance. However, policy responses remained mixed, as the memory of inflationary surges from the post-pandemic era lingered. Some central banks opted to hold rates steady, cautious not to repeat the mistakes of premature easing, while others moved incrementally in response to localised economic conditions.
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Meanwhile, Q4 2024 GDP figures released across major economies painted a picture of modest and uneven growth. The U.S. managed a slight expansion, buoyed by resilient consumer spending and a tight labour market, while parts of Europe continued to flirt with stagnation, dragged by weak industrial output and lingering energy cost concerns. China’s rebound, once a critical engine of global growth, remained lukewarm amid ongoing property sector weakness and regulatory overhangs.
Reflecting this tempered global outlook, the International Monetary Fund revised its global growth forecasts downward across most regions and economies. The fund cited continued geopolitical frictions, lagging investment flows, and the return of economic nationalism as core risks to the post-pandemic recovery. The world may not be in crisis, but confidence is far from booming.
“Amid the global turbulence, Nigeria appears to be charting a steadier course. The first quarter of 2025 offered tentative but encouraging signs that the continent’s largest economy may be turning a corner—albeit slowly and with persistent vulnerabilities.”
A brighter horizon at home
Amid the global turbulence, Nigeria appears to be charting a steadier course. The first quarter of 2025 offered tentative but encouraging signs that the continent’s largest economy may be turning a corner—albeit slowly and with persistent vulnerabilities.
After years of uneven recovery, macroeconomic indicators in Q1 pointed to an economy gearing up for sustained growth. Headline inflation, which had been a persistent thorn in the side of policymakers and consumers alike, registered a positive year-on-year movement in March, signalling a potential peak in the country’s price spiral. Though inflationary pressures remain structurally embedded—owing to fuel subsidy removal, exchange rate volatility, and insecurity in agricultural zones—the March data offered some hope that the worst might be behind.
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The exchange rate, long a lightning rod for criticism, maintained relative stability against the U.S. dollar during Q1, though volatility remains a feature rather than a bug of the system. With market reforms continuing and the Central Bank of Nigeria (CBN) gradually shifting toward a more unified rate regime, investors and businesses are adjusting to the new terrain. However, the naira’s stability remains fragile and highly dependent on the pace of reforms and foreign capital inflows.
Money supply (M3), a key barometer of liquidity in the system, rose by 0.77 percent quarter-on-quarter and 3.18 percent month-on-month to N114.22 trillion, reflecting cautious expansion in credit and improved financial intermediation. This is in part due to efforts by the banking sector to deepen penetration in underserved segments and the slow return of confidence to capital markets.
On the monetary policy front, the CBN’s Monetary Policy Committee, at its 299th meeting, chose to maintain the benchmark interest rate, signalling a desire to consolidate recent gains without spurring fresh inflationary impulses. However, average rates across treasury bills, commercial paper, and bonds remained elevated in double-digit territory, reflecting both inflation expectations and government borrowing needs.
A notable blemish in the otherwise steady performance was the decline in Nigeria’s foreign exchange reserves during the quarter. The drop, though not unprecedented, raises concerns about the country’s ability to defend the currency or finance crucial imports in the event of external shocks. With oil prices softening and non-oil exports still nascent, the reserves position will require close monitoring.
In terms of fiscal performance, the government reported revenues of N2.34 trillion as of February 2025. While this figure marks progress in collections, it remains well below the levels required to sustainably finance Nigeria’s ambitious infrastructure and social programmes. The budget deficit continues to loom large, with debt servicing costs absorbing a significant share of available funds.
Still, there were encouraging signs on the external front. Foreign trade edged up in Q4 2024, bolstered largely by a boost in imports. Though the composition of imports may raise questions—particularly the continued dependence on foreign refined petroleum products and machinery—it also reflects increased demand tied to capital investment and manufacturing inputs. More crucially, if imports are complemented by a recovery in non-oil exports, Nigeria’s current account position could improve over time.
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Eyes on the fundamentals
While the global economy fumbles for direction, Nigeria’s cautious but deliberate progress offers a rare narrative of optimism in an otherwise gloomy macroeconomic theatre. Yet, that optimism must be tempered by realism. The country’s growth path remains littered with landmines: structural bottlenecks, policy implementation gaps, and geopolitical instability could easily unravel recent gains.
Still, with inflation cooling, exchange rates stabilising, and monetary policy staying the course, Nigeria’s Q1 2025 performance offers something rare in today’s world: the hope of stability in an unstable era. Whether this moment of calm evolves into sustained transformation depends on one thing: execution.
Dr Oluyemi Adeosun is BusinessDay’s Chief Economist.
