Nigeria’s inflation to drop in 2025 amid economic reforms, says IMF

Nigeria’s inflation rate is projected to average 22.1 per cent in 2025, according to the World Bank’s latest Nigeria Development Update (NDU), as the Central Bank’s sustained monetary tightening begins to tame inflation and restore confidence in the country’s macroeconomic framework.

The report, launched Monday in Abuja and titled “Building Momentum for Inclusive Growth,” offers a detailed review of Nigeria’s recent economic performance and outlines strategic policy recommendations to foster inclusive and sustainable growth.

According to the World Bank, while Nigeria is showing progress in areas like GDP growth, revenue generation, and fiscal consolidation, inflationary pressures remain “elevated and sticky.”

The report attributes high inflation to recent economic reforms, including the removal of fuel subsidies, exchange rate unification, persistent food supply disruptions, and rising energy and logistics costs.

However, it notes that recent monetary policy actions—notably a tight interest rate stance by the Central Bank of Nigeria (CBN)—are beginning to yield results, slowing down inflation’s momentum and anchoring expectations.

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“Inflation has remained high and sticky but is expected to fall to an annual average of 22.1 per cent in 2025, as a sustained tight stance firmly establishes monetary policy credibility and dampens inflationary expectations,” the World Bank said in a statement on its website.

The NDU highlighted that Nigeria’s economy grew by 4.6 per cent year-on-year in the fourth quarter of 2024, pushing full-year growth to 3.4 per cent, the strongest non-COVID performance since 2014.

At the same time, the fiscal position has seen a dramatic turnaround. The fiscal deficit narrowed from 5.4 per cent of GDP in 2023 to 3.0 per cent in 2024, largely driven by a sharp increase in consolidated government revenues—from N16.8 trillion (7.2 per cent of GDP) in 2023 to N31.9 trillion (11.5 per cent of GDP) in 2024.

Taimur Samad, Acting World Bank Country Director for Nigeria, praised recent efforts to restore macroeconomic stability and emphasized that Nigeria now faces a rare chance to reallocate public spending toward high-impact development sectors.

“With the improvement in the fiscal situation, Nigeria now has a historic opportunity to improve the quantity and quality of development spending—investing more in human capital, social protection, and infrastructure,” Samad stated.

“International experience suggests that the public sector cannot sustainably generate growth and jobs by itself. Nigeria is no exception,” said Alex Sienaert, the World Bank’s Lead Economist for Nigeria.

“A useful strategy is to position the public sector to play a dual role—as a provider of essential public services and as an enabler for the private sector to invest, innovate, and grow the economy,” he added.