If you are wondering why this is just arriving, it is because we operate under the Lunar calendar so Happy Lunar New Year everyone đđ.
2024 was a pivotal year for Nigeria, and you can read all about it in our 2024 Wrapped.
Looking forward, the global economy is set to be significantly reshaped by the return of Donald Trump. Domestically, Nigeria will have its last year of what we call the âgoverning window.â This is the period when the current administration can pursue reform and other governance goals objectively. This is because, from 2026, all attention will be diverted towards re-election.
Macroeconomy
2021â2024 was a period of significant global inflation driven by COVID-19, supply chain shocks, Russiaâs invasion of Ukraine, and a host of other factors. But going into 2025, inflation is expected to begin tapering off. Central banks around the world are expected to start lowering rates as they will no longer be concerned with taming inflation but with driving economic growth (this obviously does not apply to Nigeria).
As for Nigeria, the CBN is faced with a dilemma. Although they have raised interest rates, inflation has remained stubbornly high. The President has stated that it will be down to about 15 percent by the end of 2025 (we also believe in miracles). But in the event that miracles donât happen, the CBN will have to decide whether to keep the rate up and maintain the high cost of borrowing for Nigerian businesses or pursue a more supply-sided approach to bring down inflation.
Economic data updates
The National Bureau of Statistics (NBS) plans to rebase Nigeriaâs GDP and Consumer Price Index (CPI), updating their calculation methods and incorporating the informal sector, which accounts for about 60% of the economy. This could lead to an upward revision of GDP and a more accurate measure of inflation. However, rebasing reflects better measurement rather than real economic growth. Capturing the informal sector remains challenging due to data gaps, and while updated CPI metrics improve accuracy, they donât address the structural factors driving inflation.
The outlook for foreign reserves in 2025 appears less optimistic despite budget projections for growth. High demand for foreign currency, driven by import dependency, limited export diversification, and capital flight, continues to strain reserves. While global oil price increases or targeted government reforms could improve reserves, the underlying structural imbalances in the foreign exchange market must be addressed for sustainable growth.
Fiscal Policy
The government budgeted approximately 48 trillion Naira for expenditure. A lot can be said about the budget, but we will focus on what we believe is the most important forecast. The budget forecasts oil production to average 2.06 million barrels a day (mb/d). We donât think that is possible. The current 1.8 mb/d is the highest it has been in 2024. That extra 200,000 b/d is going to be hard to achieve, as most investments announced by oil majors this year will not come online until 2026. So there is likely going to be higher-than-expected borrowing by the government.
Capital Markets
We think global stocks will continue to see consolidation into the USA exchanges as tech stocks continue to perform magic driven by AI and a more friendly regime under Donald Trump. Domestically, Nigeriaâs exchange activity will be dictated by the recapitalization efforts of banks and because banks do better in high-interest rate environments (they can charge higher rates for loans). If the currency continues to depreciate, stocks with significant dollar revenues (oil companies) will continue to post Naira returns.
For fixed income (a.k.a. treasury bills, bonds, and commercial paper), they will continue to provide attractive returns as interest rates remain high, but few companies will issue debt because of the cost (high interest is great for investors, bad for companies).
Elections
This year stands as a pivotal chapter for global democracy, with elections across continents set to redefine political dynamics and governance structures. In North America, Canadaâs federal election, expected by October 20, will test the ruling governmentâs popularity and ability to address pressing economic challenges. Across Europe, Germanyâs federal election, following the collapse of the governing coalition. With its status as the EU's largest economy, its election outcomes have potential implications for European and global politics.
Within the African continent, Malawiâs general election would serve as a litmus test for public trust in leadership seeing as the current president would be running for reelection. Cameroonâs presidential election could mark a turning point for political stability in a nation long dominated by one party. These elections, alongside others across the continent (Gabon, CĂ´te dâIvoire etc), are critical in a region dealing with political volatility and the lingering effects of coups in countries like Niger and Burkina Faso.
Venture Capital
2024 saw a continued decline in the amount raised by African startups, with a total of $2.2 billion, 24 percent lower than in 2023. Nonetheless, we saw the arrival of two new unicorns, Moniepoint and Tyme Bank, late last year. The development of the two unicorns, despite the funding slowdown, speaks to our point in last yearâs outlook:
âThere are still funding opportunities for startups, but the focus will remain on profitable entities.â
Going into the new year, we expect to continue seeing funding in the same fashion as we saw in 2024, funding with a focus on proven unit economics and efficiency. While foreign investors may reduce their overall activity on the continent to refocus on the U.S., where the new administration looks to create new investment and market opportunities for startups, especially in areas like AI and manufacturing, African VCs raised some additional capital last year, so we expect to see them deploy that starting this year.
The Return of the Don
As you would expect, Donald Trump is shaking things up. While his tariffs and economic policies are well-documented, one thing we know from his first term is that what he does in government is usually different from what he says on the campaign trail. So, expect the unexpected. However, from a geopolitical perspective, we anticipate a return to his transactional approach to foreign relations, especially with Europe. This, in turn, will be a major point of focus for European Union leaders. Thatâs the only thing we can predict with a certain level of certaintyâeverything else is up for grabs.
The crypto market is also something his return will affect in 2025. While only speculations on the trajectory of the prices of crypto coins can be made, his cabinet choices and campaign statements show his support to the market. This support from the administration has the ability to boost market prices of crypto coins, case in point the crypto market after his win in the last quarter of 2024.
This year is set to be a crucial year both globally and locally and we will be here to bring you the insights along the way.