The World Bank and the International Monetary Fund (IMF) have called on the Central Bank of Nigeria (CBN) to intensify its efforts to curb inflation, as Nigeria’s inflation rate climbed to 34.8% in December 2024, up from 33.6% in November, according to data from the National Bureau of Statistics.
In a panel session, Sameer Matta, Senior Economist for Nigeria at the World Bank, emphasized the urgent need for the CBN to remain resolute in its inflation-control strategies.
“It is critical to stay the course on inflation control. The central bank must continue to ensure that inflation is kept in check,” Matta stated.
He outlined several structural challenges that need addressing, including improving agricultural productivity and strengthening rural-urban linkages to boost the supply side of the economy.
Additionally, Matta called for a comprehensive review of trade policies, urging targeted sector reforms and adjusted tariffs to stabilize prices.
Matta further underscored the economic cost of inaction, highlighting that subsidies on fuel and foreign exchange alone account for about four percent of Nigeria’s GDP.
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“This amounts to five percent of GDP, which is extremely high,” he noted, stressing the importance of adopting reforms, even if difficult, while continuing social safety net programs to cushion vulnerable populations.
Christian Ebeke, Nigeria’s Country Representative at the IMF, echoed Matta’s concerns, stressing the importance of aligning fiscal and monetary policies to effectively manage inflation.
“We commend the commitment of both the CBN and fiscal authorities to strengthen coordination, which has helped reduce inflationary pressures,” Ebeke said.
He emphasized the need for deliberate policies to address the social impacts of economic reforms, including the removal of fuel subsidies and the ongoing Naira reforms, which have placed additional strain on the most vulnerable populations.
Ebeke also advocated for accelerated social protection programs, such as cash transfers, to mitigate the impact of these reforms.
Additionally, Ebeke commended the efforts of the CBN and fiscal authorities in reducing deficit monetization and improving Nigeria’s financial conditions.
He highlighted the importance of transparent liability management and noted that securitization strategies could help ease debt repayment pressures by spreading out maturities over time.
The rise in Nigeria’s inflation rate to 34.8% in December 2024 reflects a marginal increase of 0.20% from November’s rate of 34.6%. The National Bureau of Statistics attributed this rise to increased demand for goods and services during the festive season.
Year-on-year, the December 2024 inflation rate was 5.87% higher than the 28.92% recorded in December 2023, highlighting the sharp increase in the cost of living over the past year.
Both the World Bank and the IMF reiterated that swift and decisive reforms are critical to Nigeria’s economic stability.
While the path forward may require difficult policy decisions, experts agree that the long-term benefits, including economic stability, improved productivity, and enhanced living standards, far outweigh the costs.
The calls from the global financial institutions come at a crucial time as Nigeria navigates the pressures of rising inflation, subsidy reforms, and exchange rate adjustments.
The CBN, in collaboration with fiscal authorities, faces the dual challenge of implementing reforms while ensuring adequate protection for vulnerable populations through targeted social interventions.