The latest inflation figures for the month of March released by the National Bureau of Statistics last week came with some surprise as to the upside trend with a sharp reversal of the initial deflationary report triggered by the January CPI rebasing.
The new figures for March inflation which stood at 24.2%, up from 23.2% in February, has raised questions in some quarters as to whether the positive macroeconomic prospect posited in the earlier part of the first quarter of the year was fragility calm or a resilient economic reality.
Further analysis of the inflation report shows that core inflation has remained stubbornly high, indicating no signs of moderation since January. Hence the resurgence of headline inflation, coupled with sticky core prices, suggesting underlying structural price pressures.
Reviewing the macroeconomic situation in the face of the current realities, the Chief Executive of Financial Derivatives Company, Bismarck Rewane submitted that, “The lesson is simple: cosmetic calm is not the same as structural strength. Nigeria remains acutely vulnerable to both domestic and external shocks.”
He charged the managers of the nation’s economy to focus on the deployment of long-term structural reinforcement, instead of the current tactical firefighting approach.
On his part, the Managing Director/CEO Cowry Asset Management Limited, Johnson Chukwu, argues that, “The economy started the first quarter of 2025 on strong positives, but the tariff war is likely to bring to the fore the economy’s vulnerabilities and vitiate the gains made in Q1 2025.”
True recovery or momentary calm
In the first quarter of 2025 (Q1, 2025) economic analysis working through data at their disposal proffered that after years of macroeconomic turbulence, Nigeria finally seems to be catching its breath. But in the stillness, a question lingers: is this calm a sign of true recovery, or merely the eye of a brewing storm?
“By 2022, the cracks had become unmistakable: capital importation had plunged from nearly $20 billion in 2019 to just $4 billion and debt service costs ballooned to consume 90% of current government revenues”
Responding to the nation’s current economy, experts at FDC noted that Nigeria’s gross domestic product growth sizzled to an average of just 1.7% between 2015 and 2022, a sharp fall from the near 7% annual growth rates seen in the pre-2015 years.
They added that, “By 2022, the cracks had become unmistakable: capital importation had plunged from nearly $20 billion in 2019 to just $4 billion and debt service costs ballooned to consume 90% of current government revenues. The fiscal crisis deepened as debt stock nearly doubled, raising fears of a potential sovereign distress.
“Then came the exchange rate reset of 2023. The naira depreciated by over 70% in 2023/24, sparking a wave of inflation that peaked at 35% in December 2024. Money supply surged past 70% as the CBN battled with credibility and control after nearly a decade of debt monetisation, during which it printed close to N30 trillion in direct financing.”
Taking a holistic view of the economy, the FDC researchers noted that though reforms initiated by the government were painful, they brought temporary relief.
They anchored such relief on foreign portfolio inflows which rebounded to $10 billion in 2024, inflation dropped to 24% (aided, conveniently, by CPI rebasing), and money growth cooled to 15% in February 2025.
“The naira stabilized, FX liquidity improved, and GDP growth picked up to 3.4% in 2024. Government revenue doubled, debt service fell to nearly 50-60% of revenue, and fiscal deficit narrowed to about 4.8% of GDP from 5.5% of GDP. On paper, the economy had re-entered a zone of relative calm.
“But a closer look reveals that this calm is anything but secure,” they stated.
Strong rally on lower inflation outlook
Reviewing the Q1 performance of the nation’s financial market, Chukwu, noted that the fixed income segment witnessed robust activity in the first quarter of 2025, particularly in Federal Government of Nigeria bonds.
Addressing participants at the Cowry Assets Management, Quarterly Economic Review Webinar Q1, 2025, held last week, Chukwu stated that, “Investor sentiment remained upbeat, buoyed by the release of rebased Consumer Price Index (CPI) data, which revealed a significant 12-percentage-point decline in headline inflation. This sharp drop in inflation sparked a wave of optimism and triggered a rally in the bond market.”
According to him, the rally added momentum to a strategic move by the Debt Management Office which withdrew the 10-year bond from its February auction, signifying the government’s intent to reduce high cost/long-term debts in anticipation of lower interest rates in the long term.
According to him, “The move reinforced investor confidence and fuelled strong demand across both the short and long ends of the yield curve.
“As a result, the average secondary market yield declined by 104 basis points quarter-on-quarter, settling at 18.71% by the end of Q1 2025, down from 19.75% at the close of December 2024.”
On the supply side, total bond sales during the quarter printed at N1.94 trillion, marking a 128% quarter-on-quarter increase from Q4 2024. This was set against maturities of N562 billion.
Investor appetite was strong, as total subscriptions soared to N2.83 trillion translating to an impressive 173% rise from the N1.04 trillion recorded in the previous quarter.
The DMO offered N1.1 trillion in bonds across Q1, significantly higher than the N420 billion offered in Q4 2024.
The issuance strategy for the quarter featured a mix of reopened and new instruments, spread across three auctions in January, February, and March.
CBN’s hawkish stands
Addressing regulatory impact on the market during the period under review, the Cowry Assets Management boss said, “The Central Bank of Nigeria held the Monetary Policy Rate steady at 27.5%, focusing on monitoring inflation and exchange rate dynamics. Consequently, all parameters were unchained from November 2024 conclusions.”
He noted that in 2024, the CBN embarked on an assertive monetary policy trajectory, introducing its most substantial adjustments since the Monetary Policy Rate was adopted as a policy anchor in 2006.
“The MPR was raised by 8.75 percentage points year-on-year to 27.5%, in the Bank’s bid to counter stubborn inflationary pressures.
“In tandem, the Cash Reserve Ratio (CRR) increased by 17.5 percentage points to 50%, aiming to curtail presumed excess liquidity in the banking sector.
“A significant recalibration of the asymmetric corridor around the MPR was implemented, widening it from +100/-300 basis points in 2023 to +500/-100 basis points in 2024.
“This adjustment directly impacted the Standing Deposit Facility (SDF) and Standing Lending Facility (SLF) rates, which rose to 26.5% and 32.25%, respectively.
“These changes sought to incentivize banks to park their surplus funds with the central bank rather than deploy them into potentially inflationary or speculative lending activities.”
Strong external position masks structural fragilities
Meanwhile recent official data released by government agencies show that Nigeria’s external position has improved markedly. The trade surplus more than doubled to $13 billion in 2024 from $5 billion in 2023.
The balance of payments swung into a $6 billion surplus in 2024, reversing a $3 billion deficit a year earlier. Capital importation also climbed to $10 billion in 2024 from $4 billion in 2023.
However, experts are worried as they say, these headline numbers obscure underlying structural fragilities.
For instance, they pointed to the fact that the trade surplus was not driven by stronger exports. In real terms, exports actually declined to $52 billion in 2024 from $55 billion in 2023.
Instead, the surplus stemmed from a sharp contraction in imports, which fell to $39 billion from $49 billion, bookended by currency depreciation, weakening household income, and reduced refined fuel imports as the Dangote Refinery came on stream.
Speaking to the situation, Rewane said, “This is a surplus born of demand compression, not export competitiveness.”
He added that, “More worryingly, capital inflows remain heavily skewed toward short-term portfolio investments, which accounted for 89% of total inflows in 2024. Foreign direct investment remains stagnant, underscoring persistent concerns around policy coherence, macroeconomic volatility, and institutional predictability. The composition of inflows leaves Nigeria exposed to external shocks.
“In March 2025, foreign portfolio inflows plunged 65%—from $2 billion in February to $700 million—after the CBN paused its rate hikes, a move widely interpreted as a shift toward monetary loosening. Investors reacted swiftly. With thin FX buffers and an unsteady reform path, Nigeria’s apparent external strength may prove fleeting should global financial conditions tighten or investor sentiment sour.”
Naira’s brittle stability
Despite heavy CBN intervention, the naira witnessed mild depreciation across both official and parallel windows in Q1 2025. The local currency closed the quarter at N1, 536.82/$1 in the official window, up 0.09% from N1, 538.25/$1 at the end of December.
Meanwhile, the parallel market rate stood at N1, 560/$1, reflecting a 4.49% gain from N1, 670/$.
January kicked off on a bullish note as the naira appreciated by 4.14% in the official market, gaining N63.72 to close at N1, 474.78/$1.
This improvement was supported by increased CBN dollar sales to Bureau De Change operators.
A similar trend played out in the parallel market, where the naira strengthened by N45 to N1,610/$1 due to subdued dollar demand and growing market optimism over the CBN’s reform momentum.
However, February brought renewed pressure as dollar demand intensified, and FX inflows remained limited.
Although the CBN maintained its $25,000 weekly FX sale to BDCs, the naira weakened by 1.69% to N1, 500/$1 at the official window.
Conversely, it gained 5.7% to N1, 490/$1 at the parallel market, reflecting the effects of continued liquidity injection.
In March, the naira closed the month at N1, 536.82/$1 in the official market and N1, 560/$1 in the parallel market, representing monthly declines of 2.39% and 4.49% respectively.
According to Chukwu, the instability in the FX market was driven by persistent reserve depletion and weak FX inflows from oil and non-oil exports.
On his part, Rewane noted that the naira rallied in early 2025, gaining 5% and briefly appreciating to N1, 450/$, buoyed by tighter monetary policy, improved FX liquidity, and more credible CBN management. Investor sentiment improved, and foreign portfolio inflows surged.
“However, this stability seems to be brittle. In March, a pause in monetary tightening triggered a 65% drop in foreign inflows, forcing the CBN to ramp up its market intervention to $1 billion, up from $400 million in February.”
Marginal gains in oil
In Q1 2025, the global oil market remained relatively stable with Nigeria’s Bonny Light crude oil posting a modest quarter-on quarter gain of 0.56%, closing at $75.90 per barrel in March from $75.48 in December 2024. The benchmark briefly crossed the $84/bbl mark in mid-January.
Despite the modest oil price, Nigeria’s external reserves witnessed a decline, shedding 6.3% (or $2.57 billion) during the quarter to settle at $38.31 billion by March-end, down from a peak of $40.92 billion recorded in early January.
According to Chukwu, the drawdown trend was largely due to the Central Bank of Nigeria’s efforts to meet maturing obligations on 361-day OMO and 364 day Treasury bills held by foreign portfolio investors (FPIs).
“Additionally, the CBN ramped up interventions in the FX market to clear long-standing foreign exchange backlogs, estimated at $7 billion, particularly for profit repatriation and trade settlements,” he stated.
External conditions are deteriorating
Unfortunately, the real concern for Nigeria now is Trump’s return to tariff brinkmanship which has disrupted oil markets, pushing Brent crude toward $60 65pb.
Experts contend that a sustained decline below $60 would strain Nigeria’s oil revenue and erode the reserve buffer, net external reserves stand at just $23 billion.
Meanwhile, risk sentiment toward emerging markets is faltering. Nigeria remains dependent on footloose capital and lacks resilient non-oil FX sources. Without a structural boost to exports or a credible fiscal consolidation, the naira’s current calm may prove short-lived. Currency stability built on fragile inflows and policy theatrics cannot withstand more profound global shocks. The real test is yet to come.
Growth without depth
The economy grew by 3.4% in 2024, following years of declining total factor productivity and stagnant real incomes.
But economic analysts at FDC argue that this growth story is fragile, as it is driven mainly by base effects and public spending.
“Structural productivity remains low, and the private sector lacks strong incentives to invest. While fiscal authorities have slowed debt accumulation, there have been no significant reforms in spending or revenue collection that could generate sustainable economic multipliers. Corporate profitability is under pressure, and household consumption, a key GDP driver, remains constrained. Household income has fallen from around $8,700 in 2018 to nearly $4,500 in 2025, and could dip further to $3, 400,” according to an EIU report.
Lending his voice to the debate, an economist and Director, African Centre for Leadership, Monday Osasah, stated that “What Nigeria is experiencing is not robust growth, but a rebound from a low base. Without substantial investment, innovation, or inclusivity, this growth will remain shallow and short-lived. If a currency crisis resurfaces or inflation reaccelerates, what now appears to be strong growth could quickly turn to tepid expansion or even contraction.”
Need for economic resilience
Osasah warned that Nigeria must move swiftly from reaction to anticipation, from stabilization to transformation, and from rhetoric to execution.
“What Nigeria is experiencing is not robust growth, but a rebound from a low base. Without substantial investment, innovation, or inclusivity, this growth will remain shallow and short-lived”
“The country needs a clear industrial and development strategy to build a competitive, resilient economy. This requires a decisive pivot from dependence on primary commodity exports to high-value, technology-driven manufacturing. Sustained growth will depend on dismantling structural bottlenecks and removing the institutional frictions that erode efficiency and deter foreign direct investments.
“Policymakers need to accelerate fiscal reforms that broaden the revenue base beyond oil, invest in productivity-enhancing infrastructure, and create a regulatory environment that attracts long-term, stable capital. The financial sector must be recalibrated to channel credit to the real economy, especially to micro, small, and medium enterprises that drive employment and innovation. More fundamentally, the state must adopt a posture of economic agility: building buffers, reinforcing institutions, and enhancing shock absorbers.
“In an increasingly turbulent global economy, Nigeria cannot afford to confuse silence with safety,” he said.
Putting it more perfectly, Rewane said, the Nigerian economy seems to be in a state of fragile equilibrium, but stressed that while quiet may resemble stability, without structural reinforcement, it is only a pause before the next quake.
