….Charts Survival, Growth Roadmap For Businesses
The Centre for the Promotion of Private Enterprise (CPPE), one of Nigeria’s leading organized private sector advocacy groups, has charged the Central Bank of Nigeria (CBN) to soften its hawkish monetary policy measures in order to support investment growth and job creation in the economy.
The advice to the apex bank’s management was contained in the ‘Nigeria 2024 Economic Review and 2025 Outlook’ Note issued on Sunday by the Director/CEO of the Centre, Dr. Muda Yusuf, which covered a broad spectrum of the Nigerian economy and the policy and other measures that should be vigorously pursued by the governments, the OPS, and other stakeholders to growth the nation’s economy.
Specifically, Yusuf noted that given the current disposition of the CBN, monetary conditions may remain tight in 2025, pointing out, however, the degree of tightening may decelerate in 2025 given the current high levels of MPR and CRR as the space for further tightening has become limited.
According to him, some of the key factors that would shape the monetary outlook in 2025 include strong ideological commitment of the CBN to orthodox monetary policy which may continue to result in hike in interest rates, and the commitment of the CBN to philosophy of inflation targeting.
Others are, risk of elevated fiscal deficit and its inflationary implications and related risk of higher money supply growth in 2025; risk of heightened debt levels and consequential implications for increased debt service, current high interest regime foisted by the tightening regime increases the risk of loan defaults, increasing the prospects of higher non-performing loans in the financial sector.
Similarly, the CPPE boss listed other risks as high interest rate, which increases debt service cost for government with the current huge exposure to domestic debts and high interest rates typically pose significant risks to business sustainability amidst numerous headwinds.
The seasoned economist stressed that there was a need to protect the real economy from the adverse consequences of free market principles, which remain the basis of government intervention in a market economy.
On the foreign exchange (FX) review and outlook, the CPPE chief recalled that as at the close of the year, official exchange rate (NFEM) was N1,537 up from an average of N1,455.59 in January 2024 and N907.1 in December 2023.
Yusuf noted that, however, from July to December 2024, the rate had largely stabilized and attributed the moderation in exchange rate volatility to the series of regulatory reforms and the periodic intervention by the apex bank in the FX market.
He projected that the balance of outlook for the FX rate in 2025 appeared brigh based on the sustained improvement in foreign reserves which is currently in excess of $40 billion, improvement in accretion to reserves on the back of improved inflows from the IMTOs and diaspora remittances; improved capacity of the CBN to moderate rate volatility through periodic intervention in the FX market, and the positive impact of the $2 billion Euro Bond proceeds on reserves.
Others include the positive impact of the successful domestic dollar bond of $500 million, the successful clearance of legacy FX obligations of about $7 billion by the CBN, the Import substitution effect of the Dangote and Port Harcourt refineries with the consequential easing of demand pressure on the FX market; and the gradual recovery of non-oil export sector and implications for FX inflows.
Yusuf identified some of the business risks in 2025 as varying across sectors, including FX Volatility risk, Interest Rate risk, Inflation risk, Financial and Monetary Policy risk, Regulatory risk, Cybersecurity risk, Insecurity risk, Political risk, Corruption risk, especially with regard to public sector transactions and contracts, and Environmental /Climate Change risk.
To mitigate the negative impacts of the risks on their operations and profitability, the economic expert advised business owners to calibrate their strategies according to the level of exposure these risks.
In spite of the potential risks in the economy, the CPPE Director noted that the current economic reforms had their silver linings, including the enormous opportunities for import substitution across all sectors, which reduces cost, improves patronage and profitability, and boost to recycling business because of the soaring cost of raw materials and other inputs.
In addition, he pointed out that provision of domestic alternatives to medical tourism, education tourism and vacations abroad as many Nigeria elites are now seeking domestic alternatives in these areas because of the FX situation as this offers new opportunities for domestic investors, and local fabrications of spare parts and other mechanical devices.
Yusuf clarified: “High food prices offer new opportunities and incentives for investment in agriculture because of better profitability prospects.
“Outlook for export business has become very positive because of the weak domestic currency. It enhances the competitiveness of domestically produced products or services. But the local content of such products must be very substantial to guarantee good profitability prospects.
“The weak currency now offers bigger opportunities for diaspora Nigerians to invest at home.
“There should be deliberate policy to promote legal migration abroad to fill skill gaps in many of the countries in Europe and North America, especially United States and Canada. Many of these countries are also experiencing aging population which offers opportunities for our youths, many of whom are currently unemployed”, he added.
The CPPE CEO also predicted brighter prospects for outsourcing business for foreign companies; bigger Investment opportunities in the petroleum refineries and related industries following the deregulation of the sector, growing opportunities in renewable energy investment which are cheaper and more environment friendly, new opportunities in the use of CNG, LPG in transportation, and that decentralization of electricity provision opens up numerous opportunities in the electricity value chain.
He highlighted the business resilience strategies managers and owners need to prioritize in 2025 as including leveraging technology to reduce cost and ensure competitiveness, industries need to deepen backward integration to reduce the FX exposure, reduction in debt financing to reduce the burden of high interest rate, and adoption of efficient energy solutions to reduce the pressure of high energy cost.
This is even as he advised the business owners to domesticate their supply chains as much as possible, focus on talent retention, especially in specialized job functions, incorporate scenario planning framework in business strategy to manage uncertainties and volatilities, and that businesses must ensure cost optimization.
