2025 Budget: Federal Gov’t Targets 15% Inflation Rate

The Federal Government has set an ambitious goal of reducing Nigeria’s inflation rate from the current 34% in 2024 to 15% by 2025. This target, outlined in the draft 2025 national budget, was presented by President Bola Tinubu to the National Assembly on Wednesday in Abuja.

Key Drivers of Inflation Reduction

The government attributes the anticipated decline in inflation to a series of planned reforms and initiatives, including:

• Increased Local Petroleum Refining: A shift from importing refined petroleum products to producing them domestically, reducing reliance on foreign exchange for imports.
• Enhanced Agricultural Output: Boosting food production through improved security and better farming practices, leading to lower food prices.
• Higher Crude Oil Production: Increasing oil production to generate more revenue and strengthen foreign exchange reserves.

Agricultural Productivity and Food Prices

Improving security in 2024 is expected to enhance agricultural productivity, with a projected bumper harvest in 2025. Since food constitutes a significant portion of Nigeria’s inflation basket, this development could lower food prices, reduce import dependency, and ease overall inflationary pressures.

Local Petroleum Refining

The commencement of local petroleum refining is pivotal to the government’s inflation-reduction strategy. Nigeria has historically relied on imported refined petroleum, straining foreign reserves and driving up fuel prices. By increasing domestic refining capacity, the government expects to:

• Decrease demand for forex to import petroleum products.
• Stabilize the naira by earning foreign exchange through refined product exports.
• Reduce imported inflation and lower the cost of goods and services.

Strengthening the Naira

Enhancing crude oil production and cutting upstream production costs are expected to bolster Nigeria’s foreign exchange reserves, improving fiscal stability and stabilizing the naira. This will help counter the inflationary effects of currency depreciation, making goods and services more affordable.

Attracting Foreign Investments

The government plans to implement policies to attract increased foreign portfolio inflows. These investments are expected to improve forex availability, ease pressure on the exchange rate, and contribute to reducing the cost of imported goods, further stabilizing inflation.

Broader Economic Agenda

President Tinubu highlighted the importance of these measures in building a more resilient economy, stating,
“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.”

Challenges and Economic Implications

Analysts have noted that achieving the 15% inflation target by 2025 will require consistent implementation of these reforms and effective management of challenges such as:

• Global market volatility.
• Domestic policy execution.

As the National Assembly reviews the budget proposal, stakeholders remain optimistic that the outlined strategies will bring relief to Nigerians struggling with high inflation and foster sustainable economic growth.