What is your business model and how do you make money in that business? Remember, the most important decision a CEO could make in a business is the business model he or she decides to drive a company. And some of the finest entrepreneurs in our generation are actually business model pioneers, besides their technical mastery. If Microsoft had retained the business model of IBM, it would not have been super-successful. If Tesla had launched with Toyota’s business model, nothing would have changed that much.

In Igbo mythology, if you dream of going to fetch firewood, it is a bad omen. But if you dream of going to fetch water in the stream, it is a great one. While weeds take over the farm road after the firewood has been exhausted, the road to the stream is always there, because people need water in season and out of season. So, the road to the stream is life while the road to the farm for firewood has an end.

The business model of Apple is analogous to the road to the stream; you pay for the iPhone, and you keep sending money to Apple for the services which include whatever you buy in the App Store. But the Nokia feature phone is like fetching firewood, once you pay for that phone, that is it for Nokia as it never gets any other revenue from you.

That Apple’s revenue model is regenerative in nature and it is a better business model than the one Nokia depends on. Indeed, Apple has better dreams!

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The inflationary pressure on Nigeria’s economy has further intensified, with the headline inflation rate climbing to 33.88% in October 2024, according to the latest report from the Nigerian Bureau of Statistics (NBS).

This marks an increase from the September 2024 figure of 32.70%, indicating a month-on-month rise of 1.18 percentage points.

Year-on-year, the October 2024 headline inflation rate was 6.55 percentage points higher than the 27.33% recorded in October 2023. The NBS report highlights that the inflation rate’s continued rise on a yearly basis underscores a deteriorating economic situation. On a month-on-month basis, the headline inflation rate in October 2024 stood at 2.64%, a slight increase from 2.52% in September 2024, signaling an accelerated rate of price increases over the past month.

The report also noted that the percentage change in the average Consumer Price Index (CPI) for the twelve months ending October 2024 was 32.26%, reflecting an 8.82% rise compared to 23.44% in October 2023. This highlights the persistent and worsening inflationary pressures affecting Nigeria’s economy over the last year.

Urban and Rural Inflation Rates

The urban inflation rate on a year-on-year basis surged to 36.38% in October 2024, a rise of 7.09 percentage points compared to 29.29% in October 2023. Month-on-month, urban inflation stood at 2.75%, marginally higher than September 2024’s rate of 2.67%. The twelve-month average for urban inflation was recorded at 34.52%, an increase of 9.76 percentage points from 24.76% in October 2023.

In rural areas, the inflation rate also worsened significantly. The rural inflation rate for October 2024 was 31.59% year-on-year, up by 6.01 percentage points compared to 25.58% in October 2023. On a month-on-month basis, rural inflation was 2.53%, slightly higher than September 2024’s rate of 2.39%. The twelve-month average for rural inflation was 30.24%, representing an 8.01 percentage point increase from 22.23% recorded in October 2023.

Food Inflation

Food inflation, a key driver of overall inflation, reached a staggering 39.16% year-on-year in October 2024, a 7.64 percentage point increase from the 31.52% recorded in October 2023. The rise in food inflation was attributed to increases in the prices of essential items such as rice, maize, guinea corn, yam, water yam, and palm oil. On a month-on-month basis, food inflation stood at 2.94%, up by 0.30 percentage points from September 2024’s figure of 2.64%.

This rise was driven by surging prices in the oil and fats class (including palm and vegetable oils), fish class (such as mudfish and croaker), meat class (including goat meat and beef), and the bread and cereals class.

The average annual food inflation rate for the twelve months ending October 2024 was 38.12%, a sharp increase of 11.79 percentage points compared to the 26.33% recorded in October 2023.

Core Inflation

The core inflation rate, which excludes volatile agricultural and energy products, stood at 28.37% in October 2024, reflecting a year-on-year increase of 5.79 percentage points compared to 22.58% in October 2023. Month-on-month, core inflation was recorded at 2.14%, slightly higher than the 2.10% seen in September 2024. Key contributors to the rise included transport costs, housing rentals, meals at local restaurants, and personal grooming services.

The average annual core inflation rate for the twelve months ending October 2024 was 26.12%, up by 6.14 percentage points from 19.98% in October 2023.

Inflation Across States

Inflationary pressures varied across states, with Bauchi (46.68%), Kebbi (40.02%), and Sokoto (39.65%) recording the highest year-on-year inflation rates in October 2024. Conversely, Delta (27.85%), Benue (28.22%), and Katsina (29.59%) recorded the lowest. On a month-on-month basis, Kano (3.77%), Bauchi (3.74%), and Adamawa (3.59%) saw the highest inflation increases, while Kwara (1.27%), Ondo (1.49%), and Lagos (1.91%) experienced the slowest rises.

Food inflation was notably highest in Sokoto (52.18%), Edo (46.55%), and Borno (45.85%) year-on-year, while Kwara (31.68%), Kogi (33.30%), and Rivers (33.87%) recorded the lowest rates. On a month-on-month basis, Adamawa (5.08%), Sokoto (4.86%), and Yobe (4.34%) led the food inflation surge, whereas Kwara (1.11%), Ondo (1.31%), and Kogi (1.50%) had the least increases.

The Economic Impact

The continued rise in inflation underscores the growing concerns over the effectiveness of the government’s economic policies. Analysts believe this trend indicates that measures taken so far to stabilize the economy and curb inflation are failing to yield tangible results.

This inflationary pressure is compounded by the naira’s recent depreciation, despite reports from the Central Bank of Nigeria (CBN) that the country’s foreign reserves have climbed to $40 billion. Critics argue that this supposed financial cushion has not translated into macroeconomic stability or relief for citizens struggling with skyrocketing prices.

The relentless inflation surge, particularly in food prices, poses a significant threat to household consumption and overall economic growth. With basic commodities becoming increasingly unaffordable, Nigerians are grappling with diminishing purchasing power, further worsening the country’s economic woes.

The Federal Government of Nigeria has proposed a total expenditure of N47.9 trillion for the 2025 fiscal year, marking a significant financial undertaking to address the country’s economic challenges and developmental priorities.

Atiku Bagudu, Minister of Budget and Economic Planning, announced this development after the Federal Executive Council (FEC) meeting presided over by President Bola Tinubu on Thursday.

Bagudu noted that the proposed budget is based on projections contained in the recently approved 2025-2027 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP). He emphasized the government’s commitment to ensuring a stable and growth-oriented fiscal plan, even as the country continues to grapple with significant revenue and expenditure pressures.

Key Budget Parameters

The proposed budget assumes a crude oil benchmark price of $75 per barrel and an estimated daily oil production level of 2.06 million barrels per day (bpd). However, the exchange rate has been pegged at N1,400 per dollar, reflecting the continuing depreciation of the naira amidst persistent foreign exchange challenges.

The Federal Government is projecting a revenue target of approximately N33 trillion for the year, leaving a deficit of N14 trillion that will need to be financed through a combination of external and domestic borrowing.

Bagudu stated that the government has set an ambitious GDP growth rate target of 4.6%, which builds on the 3.19% growth rate recorded in the second quarter of 2024. He explained that this optimistic projection underscores the administration’s confidence in its economic policies and reforms aimed at stimulating growth and tackling inflation.

Challenges with Revenue Generation

Despite these projections, concerns have been raised about the government’s ability to meet its revenue targets, particularly given the current state of the economy and the revenue collection system.

The Federal Inland Revenue Service (FIRS) is expected to generate at least N30 trillion in 2025 to help meet the government’s targets. This figure represents a sharp increase from the N19.4 trillion target set for 2024, posing a significant challenge for tax authorities.

Bagudu highlighted some positive trends in non-oil revenue streams, such as Value Added Tax (VAT) and corporate taxes, which have performed better than expected in 2024. However, he acknowledged that delays in achieving pro-rated targets remain a significant concern.

The minister emphasized that the Federal Government remains committed to improving fiscal discipline and addressing inflation. He highlighted the government’s goal of sustaining a January-December budget cycle, which requires timely passage and signing of the 2025 budget.

To ensure this, the proposed budget will be submitted to the National Assembly by Friday, November 17, 2024, or at the latest by Monday, November 18, 2024. Bagudu expressed optimism that the 2025 budget would be passed and signed before the end of December, enabling a smooth transition into the new fiscal year.

Addressing the Deficit

With a N14 trillion deficit, the Federal Government will need to rely heavily on borrowing to fund its expenditures. Bagudu explained that the government plans to secure funds through external borrowing, local bonds, and domestic foreign exchange-denominated bonds.

Given the volume of the deficit and the backdrop of revenue shortfalls, analysts have suggested that the Federal Government may once again approach the Central Bank of Nigeria (CBN) for bailouts.

A financial expert remarked: “I feel the government will run to the CBN again for a bailout. This time, no new money will be printed. FG will be making withdrawals from the N7.4 trillion earlier repaid to the CBN under the Ways and Means program.”

The proposed 2025 budget of N47.9 trillion is below the country’s $31 billion budget in 2014, reflecting the significant impact of currency devaluation and inflation over the years. In dollar terms, the 2025 budget is approximately $28 billion, underscoring the naira’s diminished purchasing power and the challenges of managing a large-scale budget in an inflationary environment.

Concerns Over Debt and Market Risks

Financial experts and international observers have raised alarms about Nigeria’s heavy reliance on borrowing to fund the deficit. Nigeria’s growing debt profile, particularly external debt, poses significant risks. Analysts warn that issuing domestic foreign exchange-denominated bonds could fragment financial markets, while external borrowing would expose the country to volatile international market conditions.

Additionally, the naira’s devaluation has made debt servicing costs significantly higher, adding to the country’s fiscal burden. Critics have also pointed out that the use of domestic foreign exchange bonds may not provide the financial relief the government expects, as it could create market distortions and increase overall debt servicing costs.

Economists note that the success of the 2025 budget will depend on the government’s ability to expand revenue sources, control expenditures, and manage its growing debt profile. While the administration’s optimistic GDP growth projections and plans to tackle inflation suggest a positive fiscal trajectory, several challenges remain.

These include achieving ambitious revenue targets, mitigating the impact of exchange rate volatility, and addressing the rising cost of debt servicing. Analysts fear that if these challenges are not addressed, the government may continue to rely on stopgap measures such as CBN bailouts and asset sales, further undermining Nigeria’s economic stability.