Global economic forecasts for 2025 present both challenges and potential pathways for countries like Nigeria, Turkey, and Argentina as they grapple with rising inflation and the pursuit of economic stability. Recent data shows alarming inflation trends, particularly for Nigeria, which recorded its highest inflation rate of 34.6 percent—the steepest climb in 28 years—by November 2024.
The federal government of Nigeria anticipates inflation will decrease to around 15 percent by 2025, yet there are doubts about the feasibility of this target among economists. Basil Abia, co-founder of VerivAfrica, emphasized the necessity of tackling key inflation drivers, such as soaring food prices and volatile exchange rates, to create conducive conditions for significant inflation reduction. He articulated, "Without effectively addressing key inflation drivers such as high food prices, exchange rates, and excess liquidity, there won’t be sufficient conditions for a substantial decline in inflation." Abia's predictions suggest inflation could stabilize at 31 percent, deemed more realistic compared to government targets.
The situation raises questions about the Central Bank of Nigeria's (CBN) monetary policies. Following aggressive adjustments, the CBN raised its benchmark interest rate from 18.75 percent at the end of 2023 to 27.5 percent this year. Olayemi Cardoso, the governor of CBN, noted during recent monetary policy committee meetings, "We expect inflation to start easing in 2025 because of these measures." Bloomberg Economics’ Africa economist, Yvonne Mhango, has echoed optimism, stating, "After the higher-than-expected rise in Nigeria’s inflation, we now expect price gains to moderate from January—rather than December—at a slow pace." She believes sustained rate hikes are necessary until the central bank can restore positive real rates.
Comparatively, Turkey’s economy rests as the 17th largest globally, yet was not exempt from inflationary turmoil with rates peaking at 86 percent back in October 2022. Through rigorous measures involving substantial interest rate hikes from 8.5 percent to 50 percent, Turkey managed to cut its inflation from 83 percent two years prior to approximately 47.1 percent currently. The Turkish economy benefited from increased productivity and strategic public spending cuts totaling $3.1 billion, demonstrating actionable lessons for Nigeria. Analysts argue if Nigeria adopts similar tactics—boosting productivity, tightening monetary policies, and constraining excessive public expenditures—it could effectively tackle its inflation crisis.
Argentina offers another stark backdrop with historic inflation soaring past 200 percent by 2023. President Javier Milei is now under pressure to implement sweeping reforms focused on reducing government spending and stabilizing the Argentine peso, reflecting the learning curve for countries facing rampant inflation. Previous patterns indicate methodologies from Argentina underline the impact of limiting public debt and drawing down on the money supply to stabilize inflation.
For Indonesia, the path seems smoother, exhibiting resilience even amid geopolitical strife linked to the Russia-Ukraine conflict, which nudged its inflation to 5.95 percent earlier this year. Indonesia’s economic planners have applied stringent price controls and maintain adequate supply chains to keep inflation manageable—a strategy Nigeria might adopt as it explores solutions to its own economic challenges.
Ayo Teriba, CEO of Economic Associates, posits Nigeria may need to attract at least $50 billion in foreign direct investment (FDI) to bring inflation down to around 5 percent by 2025—an ambitious yet potentially transformative goal. Teriba explained during a recent Arise TV segment, "If the president can complement the efforts on tax and finance reforms with an investment act to attract $50 billion FDI within the next year, exchange rates will stabilize, and inflation will drop to single digits." His remarks come as Nigeria's FDI figures markedly improved by 248 percent to reach $103.82 million by the third quarter of 2024, signaling investment interest but still perceived as lacking to invigorate the economy significantly.
The blend of monetary and structural reforms, including those enhancing fiscal responsibility, cautious borrowing practices, and nurturing foreign investment, hold the keys to Nigeria's economic revival. Yet, stakeholders caution against continued reliance on borrowing to fund deficits; Teriba asserts this could perpetuate Nigeria's inflationary issues. He states, "The foremost issue is the quality of the debt instruments you issue. Countries of similar economic size can borrow more heavily than we do but at markedly lower rates, predominantly due to issuing higher-grade debt instruments."
Therefore, the pressing need remains for Nigeria to devise strategies reflective of the lessons learned from Turkey and Argentina, simultaneously fostering foreign investment and enhancing institutional structures. While no single approach may resolve inflation entirely, the integration of several economic reforms may paint clearer paths toward achieving fiscal resilience. Economists stress the urgency of decisive actions to transform the current economic turbulence, as emphasized by Milton Friedman’s reflection: "Inflation is taxation without legislation." It’s incumbent on Nigeria to manage inflation proactively before it became an invisible levy on its populace’s standard of living.
