Dear Subscriber,
Re: Nigeria averts economic crisis, but the pressures persist
The global economy has swung from exaggerated fears of market volatility and uncertainty to irrational exuberance of momentum traders and speculators who are making a killing by exploiting the fears of those obsessed with the status quo.
In a matter of 120 days, the S&P 500 has swung from a bear market, correction to a record high market capitalization of $63.8trn. The S&P has now gained 13% YTD. Steve Hanke, the unorthodox economist, says, “The U.S. stock market value is now more than the combined value of Europe, China, Japan, India, and Hong Kong, and by his measure, the U.S. stock market has entered bubble territory.” Whilst all that glitters is not gold, it is good to warn that excessive market conditions that look too good to be true may be untrue.
Nigeria’s Oil Price Paradox: Up You Lose, Down You Gain
The Nigerian economy is facing a classical oil price paradox. When global oil prices increase, the Nigerian government is smiling all the way to the bank and the naira strengthens, but with little benefit to the ordinary man in Ajegunle. But when oil prices fall, the guy on the street is smiling since the price of petrol will fall and the government is in tears.
Therefore, who wins in this zero-sum game where the government’s oil price gain is the people’s loss or the people’s gain from lower oil price (PMS at ₦800) is the government’s loss. This calls for a true tradeoff between people’s pockets and government junkets.
Dangote Now Holds the Key to Lower Inflation
Fortunately, Dangote Refinery has become the transmission mechanism to reduce PMS prices and bring down transport fares. Dangote’s uniform pricing and credit to marketers is a game changer and a catalyst for more private sector investment. The initiative is set to revolutionize Nigeria’s oil downstream business by cutting logistics costs and by spending over ₦1.7 trillion annually. With 4,000 CNG-powered trucks delivering refined products directly to the doorsteps of end-users, the move will lower pump prices, curb inflation, and support over 42 million MSMEs.
IMF Praises Nigeria’s Economic Reforms
Back in the day, economic patriots and left-wing analysts were of the view that the IMF was an anachronistic institution which was notorious for prescribing the same medicine (therapy) for all countries facing economic imbalances and structural rigidities. It was also wrongly reputed as being agents of neo-colonial thinking. They also are quick in pointing to countries where policy reforms prescribed by the Fund were followed by social unrest. These include Ecuador, Kenya, etc.
Therefore, it was very refreshing to listen to the latest Article IV review by the IMF, which gave a dispassionate and objective analysis of the state of Nigeria’s economy. It pointed out that some broad policy reforms, including new tax policies, unified exchange rates, and contractionary monetary policies were helping to reduce macroeconomic imbalances.
The IMF went further to warn about the vulnerability of economic performance to fiscal and budgetary slackness and cautioned about the consequences of insecurity and widespread poverty on the sustainability of the reform agenda. It acknowledged the improvement in Nigeria’s revenue collection but expressed concern on the quality of spending. The IMF raised the GDP growth projections to 3.4% and was optimistic that consumer price inflation would moderate to 23% in the final quarter of 2025. It strongly recommends a continued focus on disinflation supported by a neutral fiscal stance.
What Next: Economic Outlook for July 2025
In July, we expect money supply growth to moderate to 17% from 19.9%, while June inflation ticks up slightly to 23.1% due to seasonality, recent flooding, and insecurity. The Purchasing Managers’ Index (PMI) will ease but stay above the 50-point threshold, indicating continued, though slower, expansion.
The naira is expected to appreciate marginally, trending towards ₦1,530/$, supported by FX interventions and improved interbank liquidity, with the system’s opening position anticipated to average ₦1.3 trillion in long positions. Oil prices are likely to trade between $62-$65 per barrel, even as OPEC+ raises its production quota by 411,000 barrels per day. Meanwhile, the retail price of petrol will drop further to ₦880/litre, reflecting continued adjustments in refined product supply and pricing.
In the latest LBS Breakfast Session, Bismarck Rewane and the FDC Think Tank dissected these issues, expanding on their macro and micro implications for investment portfolios, business strategy, and the consumer market.
