Nigeria’s inflation to drop to 27.1% by December, report predicts

The NESG-Stanbic IBTC Business Confidence Monitor (BCM) report has forecasted a gradual decline in Nigeria’s inflation rate to 27.1% by December 2025, a projection that offers cautious optimism amid persistent economic challenges.

Experts believe the stabilization signals the potential impact of ongoing structural reforms, though significant hurdles remain.

Inflation, which has plagued Nigeria’s economy in recent years, was particularly acute in 2024, driven by the removal of fuel subsidies and the liberalization of the foreign exchange market.

The report notes that inflationary pressures will persist in the early part of 2025 but are expected to ease in the final quarter.

By December 2025, inflation is projected to drop from an average of 30.5% to 27.1%, aided by factors such as normalized petrol prices, improved exchange rate stability, better fiscal management, and increased agricultural output.

“We expect headline inflation to remain sticky in the first nine months of 2025 but anticipate a significant decline from September, barring any unexpected shocks. Our forecast is informed by expectations of smoother petrol prices, fiscal discipline, and improved food supplies,” the report states.

Economic analysts echo these sentiments, pointing out that while inflation will remain high, its downward trajectory could provide much-needed relief for consumers and businesses.

The expected easing of inflation is likely to influence monetary policy. The Central Bank of Nigeria’s Monetary Policy Committee (MPC) may consider a more accommodative stance toward the end of 2025, potentially lowering interest rates to stimulate economic activity.

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Dr. Adebayo Adigun, an economist, noted: “The current tight monetary policy regime has been necessary to control inflation, but as inflationary pressures ease, the MPC will have room to focus on growth stimulation. This could mark a turning point for businesses and consumers.”

The report highlighted signs of recovery in December 2024, driven by seasonal festive demand. The Current Business Performance Index rose to +0.77, marking its first positive reading since September 2024.

Agriculture led the recovery, with a net balance of +13.93, fueled by increased activity during the harvest season and heightened demand for agricultural produce. Non-manufacturing industries also showed resilience, recording a net balance of +5.80.

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However, manufacturing (-2.43), trade (-5.59), and services (-3.46) sectors continued to face headwinds from high input costs and subdued consumer demand.

The Future Business Expectation Index reflected cautious optimism, settling at +28.61 in December 2024. Businesses expressed hopes for improved conditions in agriculture, manufacturing, and non-manufacturing in early 2025.

Despite these positive projections, businesses continue to grapple with structural constraints. The Cost of Doing Business Index surged by +50.32 in December, highlighting mounting operational pressures.

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High energy costs, frequent power outages, and regulatory complexities have significantly impacted profitability.

Many firms reported relying on expensive diesel generators due to unreliable power supply. The high naira exchange rate further inflated import costs, eroding margins.

“These challenges are forcing businesses to focus on survival rather than growth,” said Taiwo Olawale, a financial analyst. “Addressing these structural issues is essential to unlocking Nigeria’s economic potential.”

The NESG-Stanbic IBTC report projects GDP growth of 3.5% in 2025, up from an estimated 3.2% in 2024. Growth is expected to be driven by improved performance in agriculture, manufacturing, and non-manufacturing industries.

“The easing of inflation and stabilization of exchange rates could bolster consumer spending and provide a significant boost to economic activity,” said Dr. Adigun. “However, addressing power shortages, regulatory hurdles, and high operational costs will be critical for sustaining growth.”