Leadnaija
A fresh report by Proshare has declared that taming domestic inflation closer to the Central Bank of Nigeria (CBN’s) desired target rate of 21 per cent can only be achieved if the country’s foreign reserves moved up to at least $60 billion.
The report titled: “Economic Outlook Report 2025: Unlocking Nigeria’s Economic Prosperity: Filling the Policy Gaps” projected that the nation’s inflation will remain high, at least in Q1 and Q2 2025.
It further added that even the reserve of $60 billion was far from the analysts’ preferred level of between $80 billion and $120 billion.
It submitted: “Until Nigeria’s foreign reserves rise significantly, domestic inflation will remain a challenge, regardless of the number of times and how high the Central Bank of Nigeria (CBN) raises its Monetary Policy Rate (MPR)”.
The report maintained: “Unlocking Nigeria’s economic prosperity is a dance of courage, creativity and consistency. There will be no shortcuts, bush paths, or tidy sidewalks; the journey will be hard, rough, and sometimes brutal.
“Those hoping to see a softening of the harsh socio economic conditions of 2024 (high domestic inflation, relatively low foreign reserves, falling output and productivity, weak job market, depreciating foreign value of the naira, lower disposable income, and rising energy costs) can expect a mixed outcome’’.
The report stated that improving the FX reserve would relieve domestic inflationary pressure and create fresh production opportunities for the private sector, as credit expansion supports private sector growth.
It said: “The crowding-out effect of public-sector borrowing would weaken as real disposable consumer incomes rise and high commercial loan costs moderate, allowing companies to defend their operating margins.
The growth of the private sector would improve job creation and close the citizens-government trust deficit. The fact that the CBN’s Purchase Managers Index (PMI) has declined for two consecutive months and is below 50 (48.9 as of November 2024) shows the pressure under which manufacturers operate.”
The report pointed out that the federal government would improve its fiscal situation by selling down its idle public assets by securitising and financialising them, thereby improving foreign reserves and relieving pressure on the domestic debt market.
“This would reduce the cost of public and private sector borrowing and bring down domestic inflation without getting caught in what economists call ‘the impossible trinity’ or ‘policy trilemma’. The government can use two clever policies to solve three complex challenges,” the report stated.
To unlock prosperity, Proshare economists insist that the fiscal authority would be remiss to repeat the old things and expect different results.
The report continued, “As physicist Albert Einstein was known to have remarked, one cannot solve a problem at the same level of thinking that created it. In this respect, the fiscal and monetary authorities must work from imagination rather than memory. The conventional and orthodox is good as long as the problem is orthodox itself.
“However, where problems wear unique designs and patterns, insisting on orthodoxy is not clever. The light bulb is not the product of the continuous improvement of the candle. The analysts believe that a whole-of-government approach to problem-solving would be the most pragmatic in present times.”
“The communication within silos amongst ministries, departments, and agencies (MDAs) is a recipe for chaos. The administration requires policy sequencing and integration into a measurable and fairly comprehensive national input and output matrix. The policy performance matrix/template must be agile, flexible, and predictive. A $1 trillion economy reflects low ambitiousness.
“Nigeria’s GDP can be five times this figure through clarity of purpose, fiscal and monetary policy design, strategic trade positioning, taking advantage of international patents (IPs), copyrights, trademarks, and trade secrets/industry design. In other words, an advantage can be taken from what has become known as the upper ends of the competitive ‘smile curve’.
“In summary, Nigeria in 2025 requires fresh thinking, a new vision, and a more precise purpose. To meet these thought leadership propositions, it is time to sequence policy actions in a measurable and monitorable manner that enables dynamic adjustments and periodic impact reviews. Nobody, including nations, succeeds without templates that have clarity, integrity, and consistency.
The success of the future starts from planning today; the careful preparation for the arduous journey is just as necessary as the destination; good politicians/public officers plan, but brilliant politicians/officers prepare and deliver execution. In 2025, to unlock prosperity, the Nigerian economy needs brilliance.Tap Here To Read Full Details
