- The Nigerian economy will witness some policies that will shape outcomes in 2025
- Some of these policies were initiated in 2024
- TheRadar highlights six of these policies, which include the tax reform bills, the Gross Domestic Product (GDP) rebasing exercise, and fluctuations in fuel price
As the new year trudges on, the Nigerian economy will react to policies from both the monetary and fiscal authorities.
These policies will set the tone for the occurrences in the economy and the extent to which Nigerians will pay for goods and services in 2025.
TheRadar highlights six policies that will define 2025. They include the tax reform bills, the Gross Domestic Product (GDP) rebasing exercise, and fluctuations in fuel price.
6 defining economic policies of 2025
1. Tax reform bills
The tax reform bills were some economic policies that defined Nigeria in 2024 given the heat it generated among citizens and groups alike.
The four tax bills submitted by President Bola Tinubu in October 2024 to the National Assembly for approval are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.
The Nigeria Tax Bill 2024 is expected to provide the fiscal framework for taxation in the country, the Tax Administration Bill will provide a legal framework for all taxes in the country and reduce disputes, the Nigeria Revenue Service Establishment Bill will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service, and the Joint Revenue Board Establishment Bill is expected to create a tax tribunal and a tax ombudsman.
Among other things, the bills seek to review the sharing formula of the Value Added Tax (VAT) to accommodate what each state gets VAT for what it generates within its territory, as well as remove VAT from essential consumption, education, healthcare, transportation, and accommodation to benefit low-income earners.
The bills faced several criticisms and opposition from different quarters, including the People’s Democratic Party, the Northern Governors Forum, and the National Economic Council, while the Afenifere endorsed the bills.
In early December, President Tinubu directed the Federal Ministry of Justice to work with the National Assembly to ensure that “genuine concerns” associated with the Tax Reform Bills are addressed before their passage by the lawmakers. However, due to public agitation and objections to the bills, the Senate paused the public hearing of the tax reform bills after it passed a second reading.
However, on January 16, 2025, the Nigeria Governors’ Forum (NGF) supported the tax reform bills and proposed a new Value Added Tax (VAT) sharing formula.
2. GDP rebasing exercise
The rebasing of the GDP is another policy that will feature prominently in Nigeria in 2025, as the National Bureau of Statistics (NBS) said it will unveil the newly rebased GDP figures by the end of January 2025.
In October 2024, the NBS announced plans to rebase the GDP data and the Consumer Price Index (CPI) to ensure the economy is streamlined according to changing economic realities and make for structural changes.
The bureau selected 2019 as the new base year because of the year’s status as a period of “relative economic stability” compared to other recent years, which witnessed significant economic headwinds.
It said, “Some major surveys that served as inputs into the rebasing covered this period. 2020, 2021, and 2022 were avoided as base years due to economic instabilities – this follows IMF guidelines.”
NBS further stated that 2019 was chosen because “other sector-specific administrative data for this period were collected.”
The GDP rebasing exercise shows the diversified and dynamic economic landscape, the reduced dependence of the Nigerian economy on crude petroleum and natural gas, as was previously the case, and the recognition of the increasing contribution of non-oil sectors, such as the real estate sector, to the economy.
The exercise includes data from new and previously underreported economic activities. It includes activities like digital economic activities, modular refineries, pension fund administrators, domestic households as employers of labour, National Health Insurance Scheme (NHIS), quarrying and other mining activities, Nigerian Social Insurance Trust Fund (NSITF), and illegal and hidden activities.
3. Inflation rate
Following the GDP and CPI rebasing exercise, the inflation rate is expected to take a new twist.
Nigeria’s inflation soared in 2024 due to economic headwinds, reaching 34.80 in December 2024 having surpassed a 28-year record four times in the year.
The increase was driven by such inflationary pressures as high costs of food and transportation, heightened demand for goods and services, especially during the festive period, and rising cost of housing and utility, among others.
Though inflation was higher in some states than others, inflationary pressures were felt across the country.
Analysts, however, believe there will be a decline in inflation in 2025 as the government’s economic reforms begin to take shape.
4. Fuel price
The fluctuation in the price of fuel is another expectation in the new year. The price of fuel is a key determinant of several economic occurrences in Nigeria.
Since the removal of fuel subsidy by President Tinubu in May 2023, there has been an increase in the price of fuel and other petroleum products.
In 2024, the price of fuel increased from an average of N238.11 in May 2023, to over N1,000 as of October 2024.
According to a recent report by the NBS, the average retail price of fuel soared by 87.10 per cent in one year. The price of the product rose from N648.93 in November 2023 to N1,214.17 in November 2024.
The increase followed fuel price hikes by the Nigeria National Petroleum Commission Limited (NNPCL), as it increased the price of fuel in its retail outlets twice within two months at approximately N998 in Lagos from N885 and N1,030 in Abuja from N897. The price was also adjusted to N1,025 in Lagos and N1,060 in Abuja in November.
With the coming onstream of the Dangote Refinery and the back and forth with regulatory authorities, Nigerians recorded a reprieve in December 2024 when the refinery partnered with MRS filling station to sell fuel at N935 per litre.
The NNPCL followed suit, cutting down its ex-depot price to N899 to ease the cost of transportation.
However, on January 17, 2025, Dangote Refinery announced an increase in the ex-depot price of fuel from N899 to N955 due to an increase in crude oil prices globally.
The market has reacted to the announcement with the price of fuel rising to over N1,000 in retail outlets.
5. Monetary Policy Rate
The direction of the Monetary Policy Rate (MPR) is another policy expectation in 2025 given that it determines the interest rate capped on bank loans.
An increase in the MPR means higher borrowing rates for businesses, individuals, and manufacturers, with the pass-through effect felt by consumers who will be forced to pay more for goods and services.
In 2024, the Monetary Policy Committee (MPC) of the CBN maintained a hawkish stance on the MPR to rein in Nigeria’s surging inflation.
The CBN increased the interest rate six times in 2024, from 18.75 per cent in January 2024 to 27.50 per cent in November, an 8.75 per cent increase, to curb inflation.
In 2025, analysts predict that the CBN will maintain a hold stance on the MPR and gradually ease the rate on the back of an expected decline in inflation.
6. Naira and foreign exchange market
The price of the naira against other convertible currencies like the dollar and Pounds will drive the Nigerian economy in 2025.
The continued depreciation of the naira and foreign exchange (forex) volatility impacted many aspects of the economy in 2024, and this may continue well into 2025, though analysts expect relative stability in the forex market.
To curb the depreciation of the naira, the CBN made key decisions, including the floating of the naira, which allowed for a willing-buyer-willing-seller model, allowing Bureau De Change (BDC) operators access to the official forex window to halt speculations and arbitrage, among others.
Experts project naira, FX stability, MPR, inflation decline, fuel price slash, others in 2025
Meanwhile, TheRadar earlier reported that experts projected some of the economic realities that will shape 2025.
These include stability of the naira and the foreign exchange (forex) market, decline in the Monetary Policy Rate (MPR) and inflation rate, reduction in fuel price, and growth of other economic indicators.
