The federal government of Nigeria has set a target to reduce the country’s inflation rate from the current 34% in 2024 to 15% by 2025. This ambitious projection was unveiled as part of the 2025 draft national budget, which President Bola Tinubu presented to the National Assembly on Wednesday in Abuja.
The government attributes the anticipated reduction in inflation to a range of strategic economic reforms and initiatives. Key measures include boosting local petroleum refining, increasing crude oil production, and improving agricultural productivity. These actions aim to stabilize commodity prices, strengthen the naira, and increase the nation’s foreign reserves.
A significant focus of the draft budget is the government’s commitment to enhancing national security, which is expected to have a transformative impact on agricultural output. With improved security measures in 2024, the government anticipates a bumper harvest in 2025, helping to drive down food prices. Given that food items make up a large portion of Nigeria’s inflation basket, these changes are expected to reduce food costs, lessen the reliance on expensive imports, and ease inflationary pressures.
The local refining of petroleum products is another crucial factor in the inflation-reduction plan. Nigeria’s historical dependence on importing refined petroleum has strained foreign exchange reserves and contributed to high fuel prices. By increasing domestic refining capacity, the government expects to reduce the demand for foreign exchange for petroleum imports and boost exports of refined products. This move is projected to stabilize the naira and lower the cost of goods and services, thus reducing imported inflation.
Increasing crude oil production is also a core part of the strategy. The government aims to boost production while lowering upstream production costs, which will help generate more revenue and strengthen the country’s foreign exchange reserves. This, in turn, will support the Central Bank of Nigeria’s efforts to stabilize the naira and mitigate the inflationary effects of currency depreciation.
Additionally, the budget proposes measures to attract more foreign portfolio investments by fostering a stable macroeconomic environment and implementing policies that encourage investment. These foreign inflows are expected to improve forex availability, reduce pressure on the exchange rate, and lower the costs of imported goods. With a more stable naira, the government expects to reduce imported inflation, further supporting the goal of reaching the 15% inflation target.
President Tinubu, in his address to the National Assembly, emphasized the importance of these measures to strengthen Nigeria’s economy. “By addressing the root causes of inflation—whether through boosting agricultural output, increasing local refining, or attracting foreign investments—we are building a stronger foundation for Nigeria’s economic future,” he said.
Economic Implications
Analysts have noted that reaching the 15% inflation target by 2025 will require consistent implementation of the outlined measures. While the government is optimistic about the potential of these reforms, challenges such as global market volatility and domestic policy execution will need to be effectively managed.
As the National Assembly reviews the 2025 budget proposal, stakeholders remain hopeful that the strategies outlined will bring much-needed relief to Nigerians struggling with the effects of high inflation.
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