Inflation Rate To Decline OverCBN’s Reforms Gains On Economy

Inflation in Nigeria is expected to experience a significant decline in 2025 as the impact of Cen­tral Bank of Nigeria (CBN), reforms continue to drive growth and development in key sectors of the economy.

From the stabilisation of exchange rates, the normalisation of energy prices following the sub­sidy removal to improved liquidity in the forex mar­ket, the economy has what it takes to achieve price stability within the year.

There is hope on the horizon regarding Nigeria’s rising inflation figures.

Expectedly, Comercio Partners, in its 2025 macro­economic outlook, highlighted that the rebasing of Nigeria’s Consumer Price Index (CPI) to 2024 would also create statistical effects that could lower infla­tion figures.

According to Ifeanyi Ubah, head of investment research and global macro strategist: “We expect headline inflation to decrease to around 15 percent in the first half of 2025, indicating a gradual return to economic stability.”

The report also emphasised the importance of local refining capacity expansion, particularly with the launch of the Dangote Refinery.

This development is expected to reduce the im­pact of exchange rate fluctuations on energy prices.

By relying more on domestically refined petro­leum, Nigeria is likely to see a reduction in energy price volatility.

This, combined with a more stable exchange rate, is expected to lower production and transpor­tation costs, creating a positive ripple effect through­out the broader economy.

The NBS has announced plans to update the base year for calculating the Consumer Price Index (CPI) from 2009 to 2024.

Initially, this adjustment is expected to lower the headline inflation figures, the report said.

However, a deeper analysis suggests a more complex picture. Although the rebasing will likely reduce CPI in 2025, it will also lower 2024 figures.

The company said the direction and magnitude of the Year-on-Year (YoY) inflation will depend on the price changes in each commodity basket over the two periods.

Given that 2024 saw one of Nigeria’s highest inflation rates, the updated base year is expected to make subsequent CPI figures appear relatively lower.

With no immediate triggers for a sharp inflation spike in 2025, this statistical adjustment aligns with the broader expectations of a decline in inflation trends.

Moreover, the reduced weightings for key infla­tion drivers, especially food and energy, reinforce the likelihood of a significant drop in inflation, supporting the forecast for a substantial decrease by mid-2025.

Despite the challenges faced in 2024, Nigeria’s economy showed remarkable resilience.

This momentum is expected to continue into 2025, supported by several key drivers, the report said.

Although inflation remains a significant chal­lenge, with consumer prices reaching 34.80% in De­cember, CBN’s aggressive tightening, which raised the monetary policy rate (MPR) by a cumulative 875 basis points to 27.50% in 2024, was a move to anchor inflation expectations.

Also, the Nigeria Economic Summit Group (NESG)-Stanbic IBTC Business Confidence Monitor (BCM) report has projected that Nigeria’s inflation rate will decline to 27.1% by December 2025, provid­ing a glimmer of hope for businesses and consum­ers grappling with persistent economic challenges.

This forecast reflects a cautious optimism about the gradual stabilisation of Nigeria’s economy as structural reforms begin to take effect, despite on­going headwinds.

Inflation has been a persistent challenge for Nige­ria’s economy, with rising fuel prices and currency depreciation driving up costs across all sectors.

The report noted that inflationary pressures were particularly pronounced in 2024, following the removal of fuel subsidies and the liberalization of the foreign exchange market. However, it projects a gradual easing of inflationary pressures in 2025.

The report forecasts that headline inflation will remain elevated during the first nine months of the year but will decline significantly in the fourth quarter.

By December 2025, inflation is expected to settle at 27.1%, down from an average of 30.5% year-on-year.

This decline will likely be driven by the normal­isation of petrol prices, improved 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% 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% y/y in 2025 and settle at 27.1% by December 2025.”

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

This shift would mark a departure from the current tight monetary policy regime aimed at controlling inflation.

Inflation targeting framework in the works

The fight against inflation intensified with the planned adoption of an inflation targeting frame­work to price management by the CBN.

The framework, which is also being implement­ed by central banks of several African countries, is expected to strengthen Nigerians’ purchasing pow­er, disposable income, drive aggregate demand and stimulate production.

The effects of rising inflation are felt by house­holds and businesses across the nooks and crannies of the country.

That is why price stability is one of the core mandates of the Central Bank of Nigeria (CBN), which is working on adopting and implementing an inflation targeting framework for the economy.

The framework, expected to replace the exchange rate targeting framework, will be implemented with the backing of the people.

In its efforts to tame inflation, the CBN recently hosted the Monetary Policy Forum 2025, featuring fiscal authorities, legislative, private sector, develop­ment partners, subject-matter experts, and scholars with the theme: “Managing the Disinflation Pro­cess”.

The forum is a major push to improve monetary policy communication, foster dialogue, and collab­orate on critical issues shaping monetary policy.

During the event, CBN Governor, Olayemi Car­doso explained that the apex bank’s focus is to sus­tain price stability, the planned transition to an infla­tion-targeting framework, and strategies to restore purchasing power and ease economic hardship.

He said the apex bank is continuing its disci­plined approach to monetary policy, aimed at curb­ing inflation and stabilising the economy.

“These actions have yielded measurable prog­ress: relative stability in the FX market, narrowing exchange rate disparities, and a rise in external re­serves to over $40 billion as of December 2024.

Cardoso reiterated that the goal of the CBN is to ensure that monetary policy remains forward-look­ing, adaptive, and resilient.

In addressing our economic challenges, col­laboration is key: “Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” Cardoso said.

“Our focus must remain on price stability, the planned transition to an inflation-targeting frame­work, and strategies to restore purchasing power and ease economic hardship,” he added.

The CBN also focused on strengthening the banking sector, introducing new minimum capital requirements for banks (effective March 2026) to ensure resilience and position Nigeria’s banking industry for a $1 trillion economy.

This week, the CBN launched the Nigeria Foreign Exchange Code, marking a decisive step forward for integrity, fairness, transparency and efficiency in our FX market. Built on six core prin­ciples, it represents a binding commitment from the financial community to rebuild trust and inspire confidence.

According to the CBN, financial inclusion also remains a priority.

The Women Entrepreneurs Finance (We-FI) initiative under the National Financial Inclusion Strategy is bridging the gender gap, ensuring more women have access to financial services and digital tools.

Remittances through IMTOs rose 79.4 per cent to US$4.18 billion in the first three quarters of 2024, demonstrating the positive impact of FX reforms.

Additionally, the CBN lifted the 2015 restriction barring 41 items from accessing FX at the official market to enhance trade and investment.

These reforms and developments reflect the Bank’s commitment to creating an enabling envi­ronment for inclusive economic development. How­ever, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.

“As we shift from unorthodox to orthodox mon­etary policy, the CBN remains committed to restor­ing confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” Cardoso stated.

He said moving from the exchange rate target­ing framework to the inflation targeting framework aligned with the apex bank’s determination to bring inflation upsurge under control in line with its price stability mandate.

Inflation uptick has remained a major concern to the CBN and is the time to use monetary policy tools to control it.

Already, the data from the National Bureau of Statistics (NBS) showed that Inflation Rate in Ni­geria increased to 34.80 percent in December from 34.60 percent in November of 2024. Inflation Rate in Nigeria is expected to be 32.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations.

Market data showed that the various oil price shocks, Covid-19 pandemic, and most recently, the war between Russia and Ukraine, have resulted in various shocks to the global economy, requiring changing responses to subdue the monetary and fiscal authorities in the advanced and emerging market economies.

To address these shocks, the CBN plans to mi­grate from an exchange rate targeting framework to phased migration and now inflation targeting framework.

The CBN has been controlling the growth of money supply to achieve price stability, but is seek­ing a change of strategy to achieve better results.

Global inflation statistics

Earlier, Cardoso global inflation is projected to decline to 3.5 percent in 2025, down from its peak of 9.4 percent in 2022.

Speaking during the last Chartered Institute of Bankers of Nigeria (CIBN) Bankers Dinner in Lagos, he said major central banks are gradually easing their monetary conditions and this shift is slowly reopening access to international capital markets for emerging economies.

However, global growth remains subdued at 2.6 percent, hindered by geopolitical tensions, China’s economic slowdown, and growing trade fragmen­tation.

He said Sub-Saharan Africa has seen modest growth of 3.6 per cent last year, while still lagging pre-pandemic levels.

“The effects of monetary tightening measures have helped to curb inflation in some key markets such as South Africa and Kenya but many countries are still grappling with double-digit inflation rates and high debt service burdens. These challenges constrain the resources available for critical invest­ment in education, healthcare and infrastructure,” he said.

While food prices remain a key contributor to the uptick, the Monetary Policy Committee mem­bers recently commended the efforts of the Federal Government for the improved security, especially in the North-East of the country, which would likely improve food production.

The Committee also noted the role of rising energy prices on the general price level due to its impact on factors of production. The recent increase in the price of Premium Motor Spirit (PMS) has also impacted the cost of production and distribution of food items and manufactured goods.

The Committee was optimistic that the full de­regulation of the downstream sub-sector of the petroleum industry would eliminate scarcity and stabilise price levels in the short to medium term.

Members of the MPC thus reiterated the need to strongly forge ahead with the deepening collabora­tion between the monetary and fiscal authorities to ensure the achievement of synchronized objectives of price stability and sustainable growth.