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Rising inflation amid mixed policy signals
Nigeria’s inflation surprisingly rose in the month of March, contrary to consensus expectations. The reasons for this can be attributed to money supply growth of 23.9%, exchange rate depreciation, a 50% telco tariff hike, and the increase in petrol price.
While inflation remains a core concern for households and businesses alike, recent government actions appear to be contrarian to this economic reality.
The DMO’s issuance schedule for Q2’25 has been reduced by nearly 50% to between ₦900bn and ₦1.2trn from ₦1.8trn in Q1’25. This effectively reduces the amount of liquidity being withdrawn from the system, thereby increasing the net money supply in circulation.
The latest Treasury Bill auction rates have declined across the board. These falling rates, amid surging inflation, send mixed signals to markets and investors. The implied message is one of excess liquidity or policy easing, which contradicts the broader inflationary environment.
The negative impact of Trump’s tariffs may be exaggerated
While global conversations focus on geopolitical tensions and the ongoing tariff war between the U.S. and the rest of the world, its actual impact on the global economy is overstated.
Previous global financial crises, such as the 1998 Asian Financial Crisis or the 2008 subprime mortgage collapse—events rooted in systemic failures—this trade conflict stems from deliberate policy decisions with limited direct transmission to the real economy.
Yet, these external distractions risk overshadowing more urgent domestic issues.
Currency pressures and oil market dynamics weigh on Nigeria’s outlook
Against the basket of currencies, the dollar weakened by 8.8%. In addition, the naira depreciated by 5% against the falling dollar. The combined effects of these two are the effective depreciation of the naira by 14%.
During the same period, the pump price of Premium Motor Spirit (PMS) declined slightly to ₦890 per litre from ₦920, reflecting downward pressure from falling global oil prices, which dropped from $74 per barrel on April 2 to $66 per barrel by April 25, 2025.
Nigeria’s oil production declined to 1.4 million barrels per day in March, down from 1.47 million in February, compounding concerns over fiscal revenue and export earnings.
This could be worsened by projected falling oil prices, driven by trade tensions and the growing influence of the US, Saudi Arabia, Russia, and OPEC, which pose a serious risk to Nigeria’s oil-dependent economy.
Inflation watch: all eyes on the April data
With reinflation in March, focus is shifting to the next inflation release and how the CBN might respond. Market participants are also closely watching the naira’s movement, with expectations growing that currency pressures could intensify if policy misalignment persists.
In this edition of FDC Prism, the FDC Think Tank examined Nigeria’s current macroeconomic environment, driven by both internal factors (inflation and declining oil production) and external pressures (such as currency fluctuations and geopolitical tensions).
