Nigeria's headline inflation rate is forecasted to average 30.5 per cent year-on-year in 2025, eventually settling at 27.1 per cent by December 2025, according to the latest NESG-Stanbic IBTC Business Confidence Monitor report.
The projection hinges on expectations that inflation will remain persistent through the first nine months of 2025 but decline below 30% by September 2025, as the high petrol costs of 2024 are smoothed out of year-on-year calculations--barring unforeseen shocks to fuel prices.
Key Drivers Of Inflation
Inflation continues to pose a major challenge for Nigeria's economy, driven by rising fuel costs and currency depreciation, which have increased expenses across all sectors. The report noted:
"Headline inflation is expected to remain sticky in the first nine months of 2025 but should ease below 30.0 per cent from September, barring any unexpected shocks to petrol prices."
Additionally, factors such as exchange rate movements, fiscal deficits, and food supply dynamics are critical in shaping inflationary trends.
Economic Outlook And Monetary Policy Implications
The report predicts that Nigeria's economy will grow by 3.5 per cent year-on-year in 2025, up from an estimated 3.2 per cent in 2024, as the impact of government policies--foreign exchange liberalisation and fuel subsidy removal--stabilises.
A projected decline in inflation in the second half of 2025 may encourage the Central Bank of Nigeria (CBN) to shift to a more accommodative monetary policy, possibly reducing interest rates to boost economic activity.
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"A relatively lower headline inflation in the latter half of 2025 should support consumer spending and enhance business activities," the report highlighted.
Sectoral Performance And Business Sentiment
Business Activity Recovery: Business performance saw a slight recovery in December 2024, driven by festive season demand. The Current Business Performance Index rose to +0.77, a notable improvement from -2.74 in November 2024, marking the first positive reading since September 2024.
Sector-Specific Insights:
Agriculture emerged as the top-performing sector with a net balance of +13.93, boosted by harvest activities and increased demand.
Non-manufacturing industries showed resilience with a net balance of +5.80, while the manufacturing, trade, and services sectors faced challenges.
