The NESG-Stanbic IBTC Business Confidence Monitor (BCM) report, has brought a glimmer of hope for Nigeria’s economy, as it predicts the Inflation to drop to 27.1% by December 2025. While the current economic climate remains challenging, this prognosis indicates cautious optimism as Structural Reforms start to show effects. Majority of the year 2025 is predicted to witness Inflationary Pressures that were worsened in 2024 by the Fuel Subsidies removal and the liberalization of foreign exchange. Inflation is expected to drop from an average of 30.5% to 27.1% by the end of the year, due to improvements in fiscal management, exchange rate stability, normalization of fuel prices, and higher agricultural output.
According to the report, Headline Inflation is expected to be above 30% for the first nine months of 2025, and inflation will probably continue to be stubbornly high. Inflation rates are predicted to fall below 30% by September 2025, primarily due to the high cost of fuel being factored out of the annual estimates. This outlook assumes no unexpected negative shocks, particularly in petrol prices. This anticipated drop in inflation could prompt a shift in the Monetary Policy stance of the Central Bank of Nigeria (CBN).
Economic Policy Adjustments and Business Sentiments.
It is expected that the Monetary Policy Committee (MPC) may take a more accommodating stance in late 2025 and possibly lower interest rates in order to boost economic activity. As the disruptive impacts of important government measures, such as the liberalization of foreign exchange and the elimination of fuel subsidies, gradually fade, lower inflation recorded in the second half of 2024 is anticipated to boost consumer spending and enhance business operations. There are indications that the overall Economy is starting to improve, despite the fact that inflationary trends have been a major cause for concern.
Business confidence showed a slight uptick in late 2024, buoyed by seasonal demand. As such, it is anticipated that the GDP will expand by 3.5% in 2025, up from an estimated 3.2% in 2024. The NESG-Stanbic IBTC BCM report has a very optimistic prognosis, which contrasts with the nation’s rising inflation pattern over time. Inflation rate recorded in 2024 was far off forecast. The World Bank had predicted that headline inflation would peak at 31.7%, but the actual figures were significantly higher.
Inflation trends and Policy Responses for 2025.
In reality, inflation jumped from 33.9% in October to an almost 30-year high of 34.6% in November 2024. Earlier in June 2024, inflation reached a 28-year high of 34.2% due to currency depreciation, increased energy prices, and the cost of imported food. In fact, the National Bureau of Statistics (NBS) released alarming data, showing that core inflation increased to 27.4% and food inflation reached 40.9% year over year. Following a brief decline from June to August 2024, inflation resumed its upward trend in the following months, rising from 32.15% in August to 34.6% in November.
This pattern suggests that inflationary pressures are expected to continue throughout the first quarter of 2025. Thus, Nigerians should not anticipate returning to pre-COVID levels of prices very soon. Throughout 2025, the CBN is likely to keep interest rates high in response to growing inflation. These policies might, however, have little effect on Nigeria’s structurally driven inflation. Nonetheless, the World Bank and the Nigerian government share a more ambitious target for inflation reduction. As per the presented 2025 budget, inflation is expected to drop significantly from the current 34.6% to 15% by the end of 2025.
Related Article: CBN revives FX sales to BDCs to tame inflation
Similarly, the World Bank report follows this optimism, estimating that Nigeria’s inflation rate could drop to 14.3% by 2027, in the medium term, if the current mix of policy implementation is maintained. However, as these projections depend on structural reforms, enhanced security, and expanded Export capacity, the path to such improvements is uncertain. Considerable threats could arise from structural issues like low agricultural productivity, insecurity, high input costs, and Infrastructure deficiencies. These issues are likely to sustain inflationary pressures in the near term, with the first quarter of 2025 expected to see further increases in inflation.