Nigeria’s inflation rate has been a significant concern in recent years, but there are expectations that it may decelerate in 2025. Dr. Muda Yusuf, CEO of the Centre for Protection of Private Enterprises (CPPE) made this projection citing a combination of government policies and improving macroeconomic conditions.

Dr. Yusuf attributed the current moderation in inflation to two primary factors, he explained that the further deceleration in the inflation rate in February can be attributed to two main factors. First, he pointed to the base effect, which refers to comparing the 2025 figures with those of 2024. Since prices in 2024 were particularly high, this comparison is likely to show a notable deceleration in the inflation rate gap. Inflation is measured year-on-year, so the elevated prices of 2024 are a significant factor. He added that this trend is expected to persist for most of 2025.

The second factor contributing to the deceleration in inflation is the improvement in macroeconomic stability. “We are beginning to see that the volatility in the exchange rate is easing,” he noted. However, he cautioned that despite this reduction, an inflation rate of 23.18% remains high, signalling that price levels are still rising, though at a slower pace.

Several factors could contribute to this, including:

  1. Monetary Policies: The Central Bank of Nigeria (CBN) has been adjusting interest rates and implementing various measures to control inflation. If these policies remain effective, they could help curb inflationary pressures.
  2. Exchange Rate Stabilization: A more stable exchange rate could reduce imported inflation, which has been a major contributor to rising prices in Nigeria. Efforts to improve the naira’s value against foreign currencies may help reduce the cost of imports.
  3. Agricultural and Food Production: With continued investment in agriculture, food production might increase, which would help ease food inflation. The government’s focus on improving the agricultural sector could have a long-term impact on reducing food price volatility.
  4. Global Economic Conditions: A stable global economic environment, including low commodity prices, especially for oil, could help ease inflationary pressures in Nigeria. If oil prices stabilize at favorable levels, Nigeria, as an oil-producing country, could benefit.
  5. Fiscal Measures: The government’s efforts to diversify the economy away from oil dependency and implement reforms that promote industrialization and productivity could improve overall economic performance, which may lead to a reduction in inflation.

However, official data from the National Bureau of Statistics (NBS) suggests a decline in inflation, public reactions on social media indicate widespread skepticism about the accuracy of these figures. Many Nigerians argue that the reduction in inflation is not reflected in the cost of goods and services.

While these factors hold potential, challenges such as global economic uncertainties, political instability, and structural issues within Nigeria’s economy may still pose risks. However, if the current policies are effectively implemented, there is hope for a further deceleration of inflation in 2025.

 

Source: Nairametrics