For many Nigerians, the year 2024 has been particularly arduous. In November, the nation’s inflation rate surged for the third month in a row, reaching 34.6%, the highest level seen in more than 28 years, as reported by the national statistics agency.

This inflation increase has been aggravated by significant flooding in the northern regions, which has led to sharp price hikes in essential commodities such as yam, corn, and rice. Furthermore, rising gasoline prices have compounded the already challenging economic conditions in Africa’s foremost crude oil producer.

President Bola Tinubu’s decision to allow the naira to devalue and to abolish fuel subsidies to stimulate economic growth has been characterized as a painful but necessary measure for an economy that has been in dire need of reforms.

In an exclusive interview, Finance Minister Wale Edun, who has spearheaded these reforms since his appointment in August 2023, offers insights to African Business on why he believes the economy is poised for recovery and how adhering to this path will favor Nigeria in 2025 and beyond.

After a difficult year, you are tasked with stabilizing and invigorating the economy. Given the reforms your administration has initiated, are you feeling positive about Nigeria’s economic outlook for 2025?

Absolutely, I am very optimistic about the economic trajectory of our country, not only for 2025 but for the years beyond. In the upcoming year, we expect to see an uplift in economic growth accompanied by a decline in the inflation rate. These expectations are documented in the Medium Term Expenditure Framework and the Fiscal Strategy Paper approved by the legislature. It’s important to acknowledge that we are not alone in these expectations; forecasts from the International Monetary Fund (IMF), the World Bank, and other analysts also predict improved growth and decelerating inflation. By 2025, many of the hurdles to economic stability are likely to be surmounted.

The primary hurdle in stabilizing our economy lies in managing inflation and keeping it at bay. We are confident that significant progress will be made in this regard shortly. Importantly, we anticipate that fuel prices, a significant contributor to inflation, will continue to decline. This current reduction is due to an increase in domestic refining capacity, notably from the Dangote refinery, a stable exchange rate, and our approach of selling crude oil to domestic refiners in naira. These elements are facilitating the drop in fuel prices, and we foresee further reductions as government-owned refineries and the BUA Group enhance their capacities. Additionally, we expect a slowed increase in food prices to also contribute to falling inflation.

The reforms we have implemented were crucial to unlocking the potential of this nation and achieving the requisite growth and development. It is vital to understand that with such reforms, initial costs must be absorbed before the benefits can materialize. A significant challenge remains in providing adequate support for vulnerable Nigerians. While progress is being made, this task has proven complex, particularly due to the lack of a universally recognized database. However, we are making headway in addressing the issues surrounding the acceptance of the database for the vulnerable population. Our direct benefit transfers have now reached nearly 20 million Nigerians, and we expect to accelerate these efforts in Q1 2025. Thus, I am not only confident in our ability to maintain our positive direction, but I also believe we are actively working to improve outcomes and markedly enhance the quality of life for every Nigerian.

Investors place a high value on transparency and predictability. There has been some dialogue regarding Nigeria’s foreign exchange reserves, which are hovering around $40 billion—the levels seen in the late 2010s. Can you shed light on this situation?

Establishing trust is essential for reinstating confidence among all stakeholders, both domestic and international. Before I address foreign exchange reserves, I want to emphasize the steps we have taken to ensure transparency and predictability in government finances, including the integration of technology to curtail leakages and opacity in transactions. We have noted a significant reduction in financial leakages.

In addition to fiscal measures, the Central Bank of Nigeria (CBN) has substantially enhanced its regulatory frameworks to foster confidence across all sectors of our financial system. Recently, it launched the Bloomberg Electronic Foreign Exchange Matching System to enable efficient price discovery, thus creating a reliable and transparent trading environment that will stabilize stakeholder expectations and enhance market predictability. This follows a series of financial market reforms initiated by the unification of various exchange rate frameworks in June of the preceding year.

As of December 14, foreign reserves amounted to $42 billion. While the CBN can provide a more in-depth analysis on this topic, I am heartened by the consistent growth of our reserves. This growth aligns with the improvements in our current account balance, underpinned by inflows from portfolio investors and remittances. Notably, reserves have steadily increased even during a year when, until recently, fuel subsidy payments restricted the CBN’s access to proceeds from crude oil exports. We expect that boosted crude oil production will further enhance the availability of foreign exchange in the economy, and it is essential to recognize the potential of our burgeoning oil refining sector to generate both domestic value and export revenues for our nation.

Your administration has enacted long-awaited reforms, including the removal of fuel subsidies. While these measures have been challenging, are you beginning to see tangible benefits for the economy?

Indeed, the positive effects of these reforms are beginning to emerge. We are observing signs of growth that instill hope for further substantial advancements on our chosen path. My earlier comments have already highlighted some of these advancements.

It’s critical to clarify that despite the ongoing reforms, Nigeria’s economy has not halted in its growth at any point. Some remarks suggesting that the economy is in recession are entirely inaccurate. The latest data indicates that the economy grew by nearly 3.5% from July to September 2024, with an average growth rate of 3.23% from January to September. Moreover, under the Tinubu administration, which commenced at the end of May 2023, the economy has enjoyed consistent growth across the board. Data from the Nigeria Bureau of Statistics for Q3 2024 indicates that 97% of our economy remains in a growth phase.

Concerns linger regarding our financial system, particularly within the foreign exchange market. The new CBN leadership, led by Governor Yemi Cardoso, has initiated comprehensive reforms that have enhanced perceptions of safety and reliability in our financial system. By ensuring the disbursement of “trapped” funds and settling outstanding debts, alongside various foreign exchange market reforms and capital enhancement mandates for banks, confidence in our financial framework has grown. Adhering rigorously to legal guidelines in borrowing from the Central Bank has allowed us to manage liquidity growth effectively. Collectively, these actions have contributed to a more stable exchange rate.

In the area of energy, we continue to aim for increased accessibility and availability of electricity alongside oil and gas production. We are witnessing new investments critical for improving production capacity. In December, Shell Nigeria announced investments in the Bonga North Field, while other local firms, including Renaissance Africa Energy, OANDO, and SEPLAT, are making strides in the onshore sector, indicating that our reform initiatives are bearing fruit.

The legislature is currently reviewing a suite of bills that could catapult the government’s financial environment into a new era. Thanks to our efforts thus far, government revenue as a percentage of national output has increased to 13% in Q2 2024, up from an average of 8% in previous years, subsequently aiding in reducing the government deficit and the allocation of resources for debt servicing.

What lies ahead on the government’s reform agenda, and what key lessons have you learned over the past 18 months?

In the short term, our focus will pivot to addressing pressing matters, including safeguarding vulnerable populations, significantly boosting food supply, reducing costs, and supporting key sectors to bolster rapid growth.

As I mentioned earlier, we still have considerable work to do to reach the most vulnerable members of our society. Our cash transfer program has successfully reached around one-third of the intended beneficiaries, which falls short of our aspirations. We have pinpointed the challenges and are diligently working to ensure coverage for all eligible recipients as swiftly as possible. Access to food is a crucial factor in enhancing the quality of life for our citizens. Despite increases in agricultural productivity, with a growth of 1.1% between July and September 2024, progress remains insufficient to adequately nourish all citizens and our neighbors in the sub-region. We are actively engaged in accelerating agricultural growth beyond population growth rates.

Enhancing output in the energy sector—oil, gas, and electricity—remains a top priority. Nigeria’s industrial goals cannot be fulfilled without efficient energy resources. We must consider various strategies to stimulate investment in the energy sector. Without an effective and affordable energy industry, our manufacturing and processing sectors will struggle to leverage opportunities presented by the African Continental Free Trade Agreement (AfCFTA). Reforms in taxation are underway; the Presidential Committee on Fiscal and Tax Reforms has already proposed bills currently under legislative review. These tax reforms will provide a more flexible fiscal framework, boosting the efficacy of monetary policy and improving the outcomes of fiscal-monetary coordination.

Central to our forthcoming initiatives is the pursuit of rapid, sustainable, and inclusive economic growth. As a government, we aspire to achieve an output growth rate of 7% by 2027 while managing inflation, stabilizing exchange rates, and ensuring interest rates are conducive for organizations seeking external funding—all while considering the successor to the current National Development Plan. Attaining these objectives necessitates encouraging investments by local wealth holders.

Implementing reforms in the face of the considerable trust deficit we inherited has proven challenging. Restoring lost trust is an arduous task, particularly in a political landscape that complicates consensus-building.

With international banks reducing their presence in Africa and foreign direct investment waning, how concerned are you about these trends? What steps is your administration taking to attract both domestic and foreign investments?

Any development that restricts access to capital for either the government or private sectors raises concern. It bears mentioning that, despite the observed decline in foreign direct investment (FDI), current data indicates that FDI growth is outpacing export growth, and this disparity is slated to widen. This presents a strategic opportunity for economies constrained by capital.

A significant outcome of the Covid-19 pandemic is the shift towards increased regionalization of supply chains. Producer nations are beginning to understand the benefits of being closer to their markets and are investing in hubs to reach a broader array of markets. It is imperative for Nigeria to enhance its appeal for investments—not merely foreign, but also domestic. Failure to do so may lead to capital flight, exchange rate stresses, and further economic turmoil. Maintaining low inflation is vital; without this, our ability to capture domestic markets and compete internationally diminishes. Furthermore, elevated inflation rates dissuade domestic investors from holding assets in our currency, prompting them to switch to foreign currencies (such as the US dollar), complicating management of domestic monetary policy.

To be attractive for investment, the quality and size of our labor force need to facilitate cost-effective production. The ongoing revisions to educational curricula are crucial in this regard. Regulatory certainty is another vital consideration; the creation and enforcement of rules and regulations must not be arbitrary, as this can undermine our national interests. I also recognize the essential role of security—both at our borders and within the nation itself.

We are actively tackling the issues I’ve outlined through various initiatives across the government. Our commitment to executing reform measures reflects our understanding that without reforms, maintaining the status quo will render our economy unappealing and at risk. Secondly, we strive to ensure that investment yields, adjusted for inflation, remain positive, recognizing that jeopardizing local wealth holders’ resources further harms the economy. Lastly, we’ve restructured the Ministry of Finance Incorporated (MoFI) to improve national balance sheet management by proactively identifying and managing assets in the national interest.

In a related effort, we are working towards consolidating public agencies responsible for managing state assets, including the Infrastructure Concession and Regulatory Commission (ICRC), the Bureau of Public Enterprises (BPE), and MoFI.

How essential is it to support national champions like the Dangote Group in advancing Nigeria’s industrial transformation and reducing import dependency?

We recognize the importance of producing for both domestic and international markets. We cannot harness the advantages of the AfCFTA without competitive production capabilities. A pressing issue we must address in the Nigerian economy is the underwhelming performance of our processing sectors in relation to national output. We need to elevate contributions from our processing sectors—manufacturing, construction, and utilities—to at least double their current levels.

I often contemplate our actual import dependency. What is the precise metric for declaring a nation as import-dependent? With imports comprising less than 20% of national output, we perform relatively well compared to many regional and continental counterparts. Some African nations depend on imports for as much as half of their national output. However, I admit that we have yet to adequately transform our imports into export opportunities. This underscores the significance of national champions; however, it is crucial for relevant agencies to ensure that our dominance in the domestic market does not adversely affect our national interests.

To what extent is the Dangote refinery contributing to improving Nigeria’s current account balance and overall balance of payments?

The Dangote Group is active across several key sectors of the economy, alongside other notable manufacturers. Strengthening the manufacturing sector is a primary focus of this administration, as it aims to diminish reliance on imported manufactured goods and enhance the current account balance, which will subsequently bolster reserves. The Dangote Group has commenced production of petroleum motor spirit, boasting a capacity of 650,000 barrels. This will soon be augmented by a 250,000-barrel capacity from the BUA Group refinery. These developments significantly alleviate foreign exchange demand pressures, improving our current account balance and enhancing the balance of payments through increased local refining capacities and additional manufacturing activities.

During your recent Eurobond roadshow, what feedback did you receive from investors regarding Nigeria’s economic direction and investment opportunities?

The oversubscription of our recent Eurobond issuance, which totaled $9.1 billion instead of the expected $2.2 billion, underscores our successful reentry into the global market, reinforcing Nigeria’s appeal as an investment destination. It’s notable that global contractionary monetary policies—arising from the Russia-Ukraine conflict to combat inflation—have limited the attractiveness of developing nations’ Eurobonds.

This oversubscription also indicates enhanced confidence in the President’s economic strategy, greater trust in the economy, and belief in its debt repayment capabilities, alongside recognition that the presidential directive for investment targets among ministries, departments, and agencies is expected to improve investment opportunities and mitigate associated risks.

Looking forward, what are your key priorities, and why should investors continue to hold faith in Nigeria?

My priorities revolve around reducing inflation while achieving robust economic growth alongside a strong social protection framework. The US has managed to control inflation through elevated interest rates while also fostering economic growth via investments rooted in savings rather than debt. We strive for a similar outcome.

Recent actions taken by investors reflect their confidence, as illustrated by the subscriptions to our debt instruments. Both the latest Eurobond issue and previous domestic US dollar-denominated bond issuances have seen oversubscription. Going forward, our aim is to create a stable, rapidly growing, inclusive, and sustainable economy. This trajectory will undoubtedly facilitate the fulfillment of aspirations for investors, particularly those with a long-term outlook, as all Nigerians, as well as residents, will experience a marked improvement in their quality of life.

Nigeria has ambitious infrastructure projects, including major gas pipeline initiatives to Europe via Morocco and Algeria. What are the government’s broader plans?

The current infrastructure stock as a percentage of GDP stands at 35%; our ambitious investment goal is to elevate this figure to 75%, as achieving this is crucial for unlocking sustained productivity.

Thus, the administration is committed to realizing these ambitious projects and revitalizing momentum to advance in 2025.

Infrastructure investment plans are organized in accordance with the Revised National Integrated Infrastructure Master Plan (NIIMP). The financing strategy encompasses a blend of debt, equity, and public-private partnerships.