Nigeria’s Inflation to Ease to 27.1% by 2025, NESG-Stanbic IBTC Report Predicts
Nigeria’s inflation rate is projected to decline to 27.1% by December 2025, according to the latest Business Confidence Monitor (BCM) report from the Nigerian Economic Summit Group (NESG) and Stanbic IBTC. This forecast provides a much-needed reprieve for businesses and consumers grappling with persistent economic pressures.
The anticipated decline suggests that structural reforms, despite their disruptive short-term effects, are beginning to yield results. However, inflation remains a pressing concern, driven by rising fuel costs, currency depreciation, and broader macroeconomic instability.
A Year of Economic Turmoil
The report highlights that 2024 was particularly challenging, with inflationary pressures surging following the removal of fuel subsidies and the liberalisation of the foreign exchange market. These measures, while necessary for long-term stability, exacerbated costs across all sectors.
Looking ahead, the BCM anticipates that inflation will remain elevated during the first three quarters of 2025 before a significant decline in the fourth quarter.
“We expect headline inflation to remain sticky in the first nine months of 2025 but settle below 30% from September as high petrol costs are smoothed out of year-on-year comparisons,” the report stated.
It added, “This expectation, alongside forecasts on exchange rates, fiscal deficits, and food supplies, informs our prediction that headline inflation may average 30.5% y/y in 2025 and settle at 27.1% by December.”
Implications for Monetary Policy
The easing of inflation is expected to influence monetary policy, with the Central Bank of Nigeria’s Monetary Policy Committee potentially adopting a more accommodative stance by late 2025. This could include reducing interest rates to stimulate economic activity and investment.
Modest Business Recovery Amid Festive Demand
The report also noted a slight recovery in business performance in December 2024, attributed to seasonal festive demand. The Current Business Performance Index rose to +0.77 in December, marking the first positive reading since September 2024.
Agriculture was the standout performer, with a net balance of +13.93, buoyed by harvest activities and increased demand for produce. Non-manufacturing sectors also showed resilience (+5.80), but manufacturing, trade, and services continued to face significant hurdles.
Challenges Temper Optimism
Despite signs of recovery, the business environment remains fraught with challenges. High operational costs, driven by inflation and exchange rate fluctuations, persist as major obstacles.
Frequent power outages compel firms to rely on expensive alternative energy sources, while insecurity, limited access to financing, and cumbersome tax regulations further compound difficulties.
Although access to credit improved modestly (+8.25), high borrowing costs continue to hinder investment. The Cost of Doing Business Index surged by +50.32 in December, underscoring the pressures facing firms.
Outlook for 2025
Despite these challenges, the report strikes a cautiously optimistic tone for 2025. Nigeria’s GDP is projected to grow by 3.5%, up from an estimated 3.2% in 2024, driven by improvements in agriculture, manufacturing, and non-manufacturing sectors.
The easing of inflation and stabilisation of exchange rates are expected to boost consumer spending and economic activity, offering a path to recovery for the nation’s embattled economy.
While the road ahead remains fraught with difficulties, the forecast signals a potential turning point for Nigeria’s economic landscape.
