Inflation expected to decrease to 27% by December — Report

According to the latest NESG-Stanbic IBTC Business Confidence Monitor report, this forecast suggests that while inflation may remain high until September 2025, it should drop below 30% thereafter, as the impact of high petrol prices diminishes, assuming no unforeseen negative shocks to petrol prices occur.

The report states, “We expect headline inflation to remain persistent in the first nine months of 2025 but to drop below 30% starting September, as the influence of high petrol costs subsides from the year-on-year inflation figures, barring any unexpected adverse developments in petrol prices.”

This expectation, combined with insights on the USD/NGN exchange rate, fiscal deficits, and food supply dynamics, supports the forecast of an average headline inflation of 30.5% year-on-year in 2025, settling at 27.1% by December.

The report suggests that this trend could lead the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to adopt a more accommodative monetary policy stance in late 2025.

A lower inflation rate in the second half of 2024 is expected to boost consumer spending and enhance business activities as the effects of key government policies (FX liberalization and fuel subsidy removal) taper off.

Overall, the Nigerian economy is projected to grow by 3.5% year-on-year in 2025, up from an estimated 3.2% in 2024.

The anticipated decline in inflation is also expected to affect monetary policy. The report indicates that the MPC may consider a more accommodating approach in late 2025, potentially lowering interest rates to encourage economic growth.

The report further notes that business performance in December 2024 showed a slight recovery due to seasonal demand during the festive period.

The Current Business Performance Index, which assesses economic activity across sectors, increased to +0.77, up from -2.74 in November. This marks the first positive reading since September 2024, indicating a modest improvement in business activity.

However, performance varied across sectors. Agriculture led with a net balance of +13.93, driven by increased harvests and demand for produce. Non-manufacturing sectors also showed resilience, recording a net balance of +5.80. In contrast, the manufacturing, trade, and services sectors faced significant challenges.

The Future Business Expectation Index, which gauges optimism about future business conditions, stood at +28.61 in December 2024, a slight decrease from +33.17 in November.

Despite this decline, the index reflects cautious optimism for improved conditions in early 2025, particularly in agriculture, manufacturing, and non-manufacturing sectors.