Nigeria’s inflation rate is projected to drop to 27.1% by December 2025, signaling a potential easing of economic challenges for businesses and consumers, according to the latest NESG-Stanbic IBTC Business Confidence Monitor (BCM) report.
The report suggests that structural reforms are beginning to take effect despite the lingering issues of high fuel costs and currency depreciation.
Although inflation spiked in 2024 due to the removal of fuel subsidies and forex liberalization, it is expected to ease gradually in 2025.
Headline inflation is likely to remain elevated for the first nine months of 2025.
A significant drop below 30% is expected by September 2025, with the rate settling at 27.1% by year-end.
Average inflation for the year is projected at 30.5%.
Monetary Policy Implications
The anticipated inflation decline might lead to a more accommodating stance by the Central Bank of Nigeria. The Monetary Policy Committee could reduce interest rates later in the year to boost economic activity.
Business activities showed improvement in December 2024, with the Current Business Performance Index rising to +0.77, marking the first positive reading since September 2024. Agriculture led the recovery, supported by increased harvest activities.
However, challenges persist:
High operational costs, exacerbated by inflation and unstable exchange rates.
Frequent power outages, forcing reliance on costly alternative energy sources.
Insecurity and restrictive tax regulations.
Economic Growth Prospects
Nigeria’s GDP is projected to grow by 3.5% in 2025, up from an estimated 3.2% in 2024.
The stabilization of inflation and exchange rates is expected to drive growth in key sectors, particularly agriculture, manufacturing, and non-manufacturing industries.
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