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January 27, 2025/InvestmentOne Research
EXECUTIVE SUMMARY
The H1:2025 outlook report, “Transitive Recalibration: Nigeria in the Eye of Global Dynamics” examines global and regional economic trends, highlighting key drivers of growth, monetary policies, inflation dynamics, and market performance. The second half of 2024 saw stabilization in many economies, alongside persistent challenges such as inflationary pressures and geopolitical risks.
Globally, economies showed recovery despite longstanding headwinds. The United States led with strong consumption-driven growth, although inflationary concerns prompted the Federal Reserve to implement gradual rate cuts. The Eurozone recorded modest recovery, supported by targeted investments and energy price moderation, while the UK faced stagnation. China maintained a positive trajectory with 5.40% GDP growth in Q4 2024, driven by fiscal stimulus, although structural issues and trade tensions with the United States posed challenges.
Central banks globally pivoted toward accommodative policies. The U.S. Federal Reserve cut rates three times to end the year at 4.50%, while the European Central Bank and Bank of England followed with similar reductions. Inflation eased globally but remained above pre-pandemic levels. Advanced economies saw moderating price pressures, while SSA nations contended with elevated inflation driven by currency depreciation and volatile energy costs.
Global equities delivered strong performances, buoyed by easing inflation and advancements in technology. The U.S. markets outperformed, with the S&P 500 rising 23.31%, driven by technology and consumer discretionary sectors, particularly advancements in artificial intelligence (AI). Fixed-income markets, however, remained volatile, reflecting inflation expectations and political uncertainties.
In Nigeria, the economy showed resilience, growing by 3.46% year-on-year in Q3 2024, buoyed by expansion in both oil and non-oil sectors following the Tinubu-led administration’s reforms. However, inflation surged to 34.80%, the highest in nearly three decades, driven by shortage of food supply amid insecurity issues, currency depreciation, supply chain disruptions, and rising fuel prices. The Central Bank of Nigeria responded with tighter monetary policy measures, including a Monetary Policy Rate hike to 27.50%, while the government introduced interventions to stabilize the Naira, boost foreign exchange reserves, and promote non-oil exports.
The domestic equity market experienced positive momentum as it continued to attract investments in the oil and gas and financial sectors, despite periods of volatility driven by inflationary pressures and currency instability. Fixed income markets benefited from higher interest rates, drawing local and foreign investors seeking competitive yields. The government’s successful return to the Eurobond market, raising USD2.20bn, highlighted renewed investor confidence and fiscal stabilization efforts.
The outlook for 2025 remains cautiously optimistic. Nigeria’s economic trajectory hinges on fiscal discipline, infrastructure development, and diversification from oil dependency. Strategic investments in agriculture, technology, and social programs are expected to drive sustainable growth. However, challenges such as elevated inflation, rising public debt, and security concerns require sustained policy action to ensure economic stability. On the global stage, moderating inflation and a gradual shift towards a more accommodative monetary policy stance are expected to support recovery, presenting opportunities for emerging markets like Nigeria.
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