Enhanced monetary policy discipline will crash Nigeria’s inflation below 20% by 2026 – World Bank 

This was highlighted in the bank’s recent assessment of Nigeria’s macroeconomic policy framework, which is supported by the ARMOR Program-for-Results (PforR) initiative and broader fiscal reforms.

According to the World Bank, the Nigerian government is staying the course with “bold and difficult steps” aimed at achieving macroeconomic stability and laying the foundation for inclusive and sustained growth. These measures are expected to bolster economic expansion, with growth anticipated to reach 3.6% in the medium term between 2025 and 2027.

The report read: “Enhanced monetary policy discipline will help bring down inflation to below 20% by 2026, while the policy commitment to more flexible and market-based exchange rate management will ensure the sustainability of external accounts along with a more comfortable FX reserves cushion. 

“Over time, the improved macro-fiscal policy framework will need to be complemented by an increasing policy focus on strengthening the efficiency of public spending and implementing structural reforms to lift private investment and foster inclusive, sustainable growth.” 

The World Bank noted that Nigeria’s inflation, while showing signs of easing, remains persistently high and volatile. After peaking at 34.2% year-on-year in June 2024, inflation dropped to 32.2% in August, thanks to tighter monetary policies and favorable base effects.

The CBN also halted development financing for fiscal deficits, focusing on price stability. Moreover, it has conducted large open market operations (OMOs), totaling over NGN 6.6 trillion in the first eight months of 2024—a figure 30% higher than the combined OMOs of the previous three years.

In addition, the CBN adjusted its Cash Reserve Ratio (CRR) policies and increased standing deposit and facility rates, measures aimed at re-anchoring short-term market rates to the MPR and attracting foreign exchange inflows. These steps have strengthened Nigeria’s exchange rate stability and drained excess naira liquidity, aligning with broader efforts to stabilize the macroeconomic environment.

Despite these gains, the World Bank cautioned that significant risks remain. Reversing reforms—such as returning to multiple exchange rates or relying on the CBN to finance deficits—could exacerbate inflation and debt service costs. Financing pressures could intensify if oil production declines or non-oil revenues falter.

While acknowledging the progress made, the World Bank stressed the need for continued commitment to these reforms. It noted that efforts to improve fiscal sustainability, including the reduction of the fiscal deficit to below 4% of GDP, will play a significant role in achieving macroeconomic stability.