Analysts have suggested paths to macroeconomic growth and lower inflation in Q4:25.
They gave the suggestion against the backdrop of high global uncertainty, tighter global financial conditions, and rising borrowing costs, concerns about as well as weak business confidence and tight financial conditions in Nigeria.
They said that although festive-induced spending may offer a temporary lift to activity, particularly in Q4-25, overall growth is expected to remain subdued over the near to medium term as the slower growth reflects a moderation in growth across the services and construction sectors, while the production sector sustained contraction continue to weigh on economic activities.
“The Central Bank of Nigeria’s aggressive interest rate hikes helped stabilise investor confidence and channel more funds into fixed-income instruments in 2024, boosting market participation and liquidity”, they said.
According to the CBN, private sector activity remained firmly in expansionary territory for the tenth consecutive month.
The Composite PMI increased to 55.4 points in October (September: 54.0 points), reflecting stronger momentum across agriculture, industry, and services sectors.
The Industry PMI rose to 54.2 points (September: 51.4 points), marking a second month of improvement, supported by firmer consumer demand that lifted raw material purchases, output and employment.
Besides, the Services PMI climbed to 55.6 points (September: 54.7 points), extending its nine-month expansion on the back of stronger demand, which in turn boosted output and activity across key subsectors such as wholesale and retail trade, utilities, educational services, motion pictures, cinema, sound recording & music production, and health care & social assistance.
The agriculture PMI also strengthened, rising to 55.7 points (September: 54.8 points), driven by the ongoing main harvest, which supported improvements in overall farming activity, inventories and employment
Cordros Researchers in their weekly economic and market report, stated that business activity remained firmly in expansionary territory for the tenth consecutive month, reflecting stronger momentum across agriculture, industry, and services sectors
“Looking ahead, private sector conditions are expected to remain expansionary, supported by gradually improving macroeconomic fundamentals, including naira appreciation and easing inflationary pressures.
“In addition, the recent dovish shift in monetary policy is likely to ease tight financing conditions over time, reinforcing broader economic activity in the near term”, they said.
According to the them, the naira appreciated last week by 0.5% w/w to NGN1,435.00/USD, amid the USD50.00 million intervention from the Central Bank of Nigeria.
“We maintain a positive outlook on the naira, supported by expectations of sustained foreign exchange liquidity. On the domestic front, rising non-oil exports and improving market confidence should underpin inflows, while externally, healthy foreign exchabge account position, and a firmer global monetary easing are expected to reinchange reserves, a positive current force foreign investor sentiment and stimulate additional foreign exchange market inflows”.
Kemi Awodein, President of the Association of Issuing Houses of Nigeria, stated that the apex bank relied on steep rate adjustments to contain inflation and restore balance to the financial markets.
She noted that while the high-interest environment crowded out private-sector issuances, it also strengthened investor inflows and improved liquidity
“Despite these challenges, as the year progressed, there was renewed investor confidence, driven by government policies and the anticipation of interest rate cuts in other markets. Significant in the year was the successful issuance of the first domestic dollar bond by the Debt Management Office”,
An executive director of a new generation commercial bank, who craves anonymity, told Daily Independent that growth is the predominant driver of many successful reductions in debt.
The banker noted that debt reduction is more likely, more significant, and more persistent if Nigeria has a solid domestic institutional framework and enjoys a supportive domestic business environment; global growth is buoyant; and global borrowing costs are low.
According to the financial expert, a relatedly budget consolidation must be sustained over time to translate into debt consolidation.
While Nigeria’s exchange rate stability can support successful debt stabilisation, maintaining an overvalued exchange rate can prove counterproductive since it is likely to lower growth and hamper overall macroeconomic stability”, the expert said
He added: ‘’The key message for our policymakers is that fiscal adjustment is likely to result in stronger, more durable reductions in debt when complemented by pro-growth structural reforms and by measures to strengthen institutional frameworks. Such measures should include well-designed fiscal rules to ensure that off-budget fiscal operations do not undermine debt reduction. Efforts to cut debt are also more likely to prove successful in a context of macroeconomic stability, including low and stable inflation.”
Mr. Adewale-Smatt Oyerinde, the Director-General of the Nigeria Employers’ Consultative Association (NECA), told Daily Independent that the modest reduction in the MPR by the Central Bank of Nigeria is commendable as its benefits will depend on effective transmission into the real economy.
“If credit costs are lowered, businesses can access affordable financing, expand investments, and create jobs. However, the persistently high CRR and other liquidity restrictions risk limiting these intended outcomes” ,he cautioned.
He explained that high operating costs driven by raw materials, energy, and logistics continue to threaten sustainability.
“Without affordable credit and structural reforms, enterprises will struggle to expand,” he said. For international investors, he highlighted the need for consistency and credible reforms, he said, adding that “policy stability, improved macroeconomic fundamentals, and transparent reforms are essential to position Nigeria as a competitive investment destination.”
Dr.Muda Yusuf, the CEO, Center for the Promotion of Private Enterprise (CPPE), told Daily Independent the CBN has undertaken comprehensive reforms aimed at restoring confidence, strengthening governance, and repositioning the financial system to support inclusive and sustainable economic growth.
He said while necessary machinery to combat inflation, the current stance is highly restrictive: Monetary Policy Rate (MPR) at 27.5% and Cash Reserve Ratio (CRR) at 50% have considerably pushed up the cost of funds; elevated lending rates have suppressed private sector borrowing, particularly in manufacturing, agriculture, SMEs, real estate and other sectors; there is a growing risk that private investment could be displaced by high-yield government
He added: “Addressing structural financing gaps and sustaining governance reforms will be critical for unlocking the financial sector’s full potential as a driver of inclusive economic development”.
Auwal Ibrahim Musa (Rafsanjani), Executive Director, Civil Society Legislative Advocacy Centre (CISLAC), told Daily Independent that government must complement the MPC’s decision with broader interventions, including stabilising the exchange rate to curb imported inflation, improving security in farming communities, expanding mechanization to drive agricultural productivity, and tackling bottlenecks in energy, transport, and regulation.
He added: “It is time to complement price stability with deliberate growth stimulation. This is the message that Nigerians need for relief from the cost-of-living crisis, and it is also what international investors are waiting to see, credible, sustained reforms that create an enabling environment for inclusive growth”.
SOURCE: Independent
