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- A new report has projected that Nigeria’s inflation rate will drop to 27.1 per cent by December 2025
- The slowdown will be driven by petrol prices and exchange rate stability, better fiscal management, and increased agricultural output
- The report noted a cautious optimism in business performance in the year
Nigeria’s inflation rate is projected to drop to 27.1 per cent by December 2025.
This is according to the NESG-Stanbic IBTC Business Confidence Monitor (BCM) report, which stated that inflationary pressures that were very pronounced in 2024 will gradually ease off in 2025.
The report noted that the effects of fuel subsidy removal and floating of the naira, which allowed for a willing-buyer-willing-selling trading model in the foreign exchange market, were felt in the economy, heightening inflationary pressures.
According to the report, headline inflation will remain elevated during the first nine months of the year but will significantly decline in the fourth quarter.
Inflation is projected to decline to 27.1 per cent by December 2025 from an average of 30.5 per cent year-on-year.
A slowdown in inflation is one of the economic expectations highlighted by experts for the year, as they predict the rate to swing between 25 and 27 per cent by year-end.
The report said the decline will likely be driven by the stabilisation of petrol prices, exchange rate stability, better fiscal management, and increased agricultural output.
It read, “We expect headline inflation to remain sticky in 9M:25 but settle below 30.0 per cent from September 2025 as high petrol cost gets smoothened out of the year-on-year headline inflation, barring any unexpected negative shocks to petrol prices.
“This expectation, in addition to our prognosis on the USD/NGN pair, fiscal deficits, and food supplies, informs our forecast that the headline inflation may average 30.5 per cent y/y in 2025 and settle at 27.1 per cent by December 2025.”
Projected easing of inflation expected to influence MPR
Inflation in Nigeria has remained persistent, swinging multiple times in 2024 before reaching a 28-year high of 34.60 per cent in November 2024.
The surge was largely due to rising fuel prices and currency depreciation driving up costs across all sectors.
With the forecasted easing of inflation in 2025, it is expected that the Monetary Policy Rate (MPR) will follow the same trajectory.
A slowdown in inflation might influence the lowering of the MPR, given that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) maintained a tight monetary stance in 2024 due to heightened inflation.
The CBN hiked the MPR six times in 2024 from 15.5 per cent in October 2023 to 27.50 per cent in November 2024, aimed at reducing the money supply and ultimately reining in surging inflation.
Improved business performance
The report also highlighted improved business performance in December 2024, driven largely by seasonal festive demand.
The Current Business Performance Index, which measures the level of economic activity across sectors, rose to +0.77, compared to -2.74 in November.
This improvement is the first positive reading since September 2024, an indication of a modest uplift in business activity during the festive period.
According to the report, business performance across sectors was mixed, with the agricultural sector marking a net balance of +13.93. The sector’s performance was driven by the harvest season activities and increased demand for agricultural produce.
Non-manufacturing industries recorded a net balance of +5.80, while the manufacturing, trade, and services sectors continued to struggle. Manufacturing recorded a net balance of -2.43, trade fell to -5.59, and services declined by -3.46.
Business optimism and expectation for coming months
The Future Business Expectation Index showed cautious optimism in business confidence for the coming months.
The index stood at +28.61 in December 2024, a slight decline from +33.17 in November, indicating a level of positive sentiment.
Across various sectors, businesses expressed hopes for improved conditions in the first quarter of 2025, especially in agriculture, manufacturing, and non-manufacturing industries.
Business optimism was deflated by factors such as high operational costs due to high exchange rates, naira depreciation, and inflation, which have continued to chip at profitability.
Higher energy costs due to frequent power shortages also increased production costs as many firms resorted to expensive alternative energy sources.
The report also highlighted the challenge of insecurity, limited access to financing, and the complexity of multiple tax regulations as other factors dampening business optimism
Though access to credit saw a slight improvement in December 2024 with a net balance of +8.25, the high cost of borrowing remained a critical barrier to investment and expansion.
Experts project naira, FX stability, MPR, inflation decline, fuel price slash, others in 2025
Meanwhile, TheRadar earlier reported that experts projected some of the economic realities that will shape 2025.
These include stability of the naira and the foreign exchange (forex) market, decline in the Monetary Policy Rate (MPR) and inflation rate, reduction in fuel price, and growth of other economic indicators.
