Nigeria’s Bold Economic Reforms: How Investors Can Benefit from New Opportunities in 2025

February 19, 2025

Nigeria has been grappling with economic challenges, arguably since 2015, though the strain has been more acute in the last two years.

In response, policymakers have implemented several bold reforms over the past 18 months as part of efforts to put the country on a path toward sustainable recovery. But what do these changes mean for everyday Nigerians? First, let’s review past events.

A Look into the Past (How big is the problem?)

In 2023, Nigeria’s economy faced serious challenges. Inflation rose from an already high 28.2% in 2023 to 34.6% by late 2024, making everyday goods and services more expensive. The Naira also lost significant value against the US Dollar, dropping 49.1% in 2023 and another 41.0% in 2024. These weren’t just statistics; real people were affected by the rise in inflation. Families struggled to afford necessities and businesses grappled with rising costs, which they were unable to fully pass on to consumers, and uncertainty.

Turning the Tide (Bold reforms in action)

In the face of mounting challenges, the Nigerian government stepped up with a series of sweeping reforms. Though tough to swallow, these measures are necessary to reset the economy.

Fuel Subsidy Removal:

By September 2024, petroleum subsidies were fully eliminated. This move is aimed at reducing significantly the expenditure directed to cover this untargeted subsidy which fuelled corruption and cross border smuggling. While painful, this shift should allowfor better resource allocation going forward as well as increased oil revenue remittance from NNPC to the Federation Account.

Liberalizing the Forex Market:

The government, through Central Bank of Nigeria (CBN), removed its hard peg on the Naira and allowed the exchange rate to be influenced more by market forces. This removed the subsidy on some US Dollar payments as well as the preferential treatment of some interests. Alongside this, the CBN cleared a backlog of dollar claims from previous years, which improved confidence in the market.

Monetary Policy Tightening:

To combat inflation, the CBN raised the MPR to 27.5% and worked to halt the abuse of Ways and Means funding of Government expenditures. The higher MPR rate raised interest rates, especially for fixed-income securities such as treasury bills and bonds, making them more attractive to investors as they now offered better returns. Click here to learn more about fixed-income securities.

Impact on Nigerians: Immediate Challenges and Long-term Opportunities

While the reforms are causing short-term difficulties as different areas of the economy re-adjust to the new realities, including higher living costs and reduction in consumer purchasing power, there are also long-term opportunities for growth if the reforms are followed through:
👉🏾 A More Stable Currency:
The forex market reforms should increase the supply of foreign currency to the official market from non-government sources which will in the end stabilize the naira and aid in better financial planning while improving trade, especially more competitively priced exports with international partners.

👉🏾Better Allocation of Resources:
The removal of these untargeted subsidies should free up additional capital for investment in infrastructure, education and healthcare while the more vulnerable members of society can have access to better planned and targeted support programs.

👉🏾Attract More Foreign Capital:
The reforms should improve the attractiveness of Nigeria as an investment location for foreign investors while also encouraging local investors to invest more as well. There are more reforms that need to be put in place to further improve the investing and business environment but this is a good start.

Will the Reforms achieve the aims of policy makers?

Coronation Research has laid out three potential outcomes for Nigeria’s economy in 2025:

Most-Likely Scenario (65% probability):

Inflation could drop to 23% by the end of 2025, and the Naira might stabilize at around 1,750 per US dollar. Gradual improvement is expected, though challenges will persist.

Best-Case Scenario (25% probability):

Inflation might fall as low as 18%, and the Naira could even gain value against the dollar. This scenario hinges on exceptionally strong policy implementation and external factors aligning favourably.

An example of an external factor in this optimistic scenario could be a significant increase in Nigeria oil production and it being sustained throughout the year. As Nigeria is heavily reliant on oil exports for government’s non-naira revenue, a sustained increase in production combined with favourable oil prices would boost government revenues, improve foreign exchange reserves, and strengthen the Naira. This external factor and effective policy implementation could help drive inflation down and stabilize the economy.

Worst-Case Scenario (10% probability):

A rollback of reforms due to social pressure could push inflation up to 36% and weaken the Naira to 2,200 per US dollar. This would be a step backwards for the country.

How Are Investors Reacting?

International investors are cautiously optimistic. In the second half of 2024, Nigeria attracted over $1 billion in foreign portfolio investments and raised $2.2 billion through Eurobonds. This suggested growing interest in Nigeria from foreign investors especially at the elevated yields of Nigerian debt. The key is that will the reforms also attract significant Foreign Direct Investment as well as encouraged local investors to expand their investment plans – this will be the real vote of confidence in the direction the reforms are directing the economy towards.

How Nigerians Can Prepare

As these changes unfold, individuals can take steps to adapt and position themselves in the evolving economic conditions:

Enhance Wealth Creation Skills:

Improving your investing skills is crucial. Start with resources like Coronation Investment Academy to navigate economic challenges, especially as a beginner in investing.

Invest in Fixed-Income Securities:

Consider safe and steady short-term investments like the Coronation Money Market Mutual Fund, offering up to 25% per annum. For those more interested in equities, opening a brokerage account with Coronation Securities could help diversify your investment portfolio.

Gamified Stock Trading:

If you’re risk-averse, test your skills with the Coronation Fantasy League, a gamified platform designed to help you learn how to buy shares and invest in stocks without the risk.

Stay Informed:

Keep up-to-date on economic policies through Coronation Research’s weekly updates. Understanding these shifts will help you manage your personal finances effectively.

Invest in Innovators:

Support businesses that are adapting and innovating in this new economic environment. Coronation Securities provides weekly stock recommendations to guide your investments in high-potential stocks.

Finding those diamonds in the rough with the current economic situation

The elevated interest rates mean that as an investor with some savings these can be invested in FGN debt instruments including the Savings Bond to get a good return. The stock market has also been doing relatively well and a savvy, informed investor can build a resilient performing portfolio with expert advice.

The economy is not in the best shape, but improvements are expected. However, this does not stop investors from finding green shoots of performance as they navigate this challenging landscape.

To start investing today, download the Coronation Wealth App Plus on Apple IOS or Android Play Store. For inquiries on how to invest or manage your portfolio, consolidate your assets, insure, and bank with Coronation, visit our websites or contact us directly using the details below:

📌 Coronation Asset Management Ltd

📞 [Somekene Jipreze] – Tel: 020 1227 2567 (68)

📩 sjipreze@coronationam.com

📌 Coronation Merchant Bank Ltd

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📩 ojatau@coronationmb.com

📌 Coronation Trustees Ltd

📞 [Adelekan Balogun] – Tel: 09074083213)

📩 abalogun@coronationnt.com

📌 Coronation Life Assurance Ltd

📞 [Anthony Olasele] – Tel: 02012774500

📩 Anthony.Olasele@coronationinsurance.com.ng