Nigeria’s 2025 Economic Prospects Inspire Cautious Optimism

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January 14, 2025/CSL Research

Global trade tensions are looming, with the potential return of Trump to the White House raising concerns about new tariffs on U.S. imports. The President-elect has proposed imposing a 60% tariff on all goods from China and a 25% tariff on imports from Canada and Mexico. Regardless of the magnitude of the tariff increase, we see risk to the global economy.

The Tax Cuts and Jobs Act (TCJA), enacted during Trump’s first term, now appears poised for full extension beyond its originally scheduled expiration at the end of 2025. Additionally, the President-elect has proposed further tax reforms, including reducing the corporate tax rate from 21.00% to 15.00%, introducing household tax cuts such as exemptions on tips and overtime, eliminating taxes on Social Security benefits for older adults, and removing the $10,000 cap on state and local tax (SALT) deductions, among other measures.

The U.S. dollar has remained resilient, outperforming the currencies of G10 countries throughout 2024, despite FX valuations suggesting it has been overvalued for the past 2 to 3 years. In 2025, the dollar is expected to strengthen further, driven by inflation, which is likely to stay above the Federal Reserve’s 2.0% target. At its most recent meeting, the U.S. Fed projected that core Personal Consumption Expenditures (PCE) inflation could remain elevated at 2.5% in 2025.

In October 2024, Nigeria, along with 12 other nations, were added to the BRICS community as a partner country, though not yet a full member. This development is a positive step, as it is expected to enhance Nigeria’s engagement with the BRICS bloc and boost trade activities. Currently, Nigeria’s exports to BRICS nations account for less than 15.00% of its total trade, which is mostly to India and China. Full membership, when achieved, is anticipated to bring reduced trade restrictions and facilitate smoother cross-border interactions, further strengthening economic ties across different sectors, including medicine and agriculture.

On the Domestic front, The tough macro environment has dampened business confidence. Businesses, especially those in the sectors that are sensitive to interest rate adjustments, struggled in 2024. In addition, the FX related concerns have also affected business profitability, with companies reporting FX losses in the Telecoms, consumers, and manufacturing sectors.

Outlook suggests that currency devaluation will be minimal in 2025 (see FXsection of the report), indicating that businesses are like to report lower FX losses, which will support profitability. Additionally, with inflation likely to moderate modestly in 2025 (see inflation section of the report), interest rate may be lower, supporting business recovery.

To download the full report, please click on the link below.​​​​​​​

Nigeria’s 2025 Economic Prospects Inspire Cautious Optimism.pdf

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