Nigeria is currently facing a significant inflation crisis, with rates exceeding 40%. The Central Bank of Nigeria (CBN) has responded by raising its benchmark interest rates to 33.9% in 2024, but this has had little effect on curbing inflation, particularly food inflation, which has reached around 45% [63a5035f]. Kazeem Bello, an economist, emphasizes that simply increasing interest rates is not enough to address the deeper macroeconomic issues at play [63a5035f].
Looking ahead, projections indicate that Nigeria's headline inflation rate is expected to average 30.5% year-on-year in 2025, with a potential decline to 27.1% by December 2025. However, inflation is anticipated to remain above 30% until September 2025, largely driven by high petrol costs and ongoing currency depreciation [a83251b6]. The CBN may consider adopting a more accommodative monetary policy if inflation begins to decline [a83251b6].
Despite these challenges, Nigeria's economy is projected to grow by 3.5% in 2025, a slight increase from 3.2% in 2024. The agriculture sector is showing strong performance, reflected in a net balance of +13.93, and the Current Business Performance Index improved significantly from -2.74 in November 2024 to +0.77 in December 2024 [a83251b6].
The CBN's inflation target has consistently been missed, and while foreign reserves have surpassed $40 billion, they have not stabilized the Naira against depreciation [63a5035f]. The proposed 2025 budget includes a benchmark exchange rate of N1,400, which many view as a reference point rather than a viable solution to the currency crisis [63a5035f]. Additionally, a tax reform bill has faced criticism for exempting over 60% of the population from taxes, raising concerns about the government's revenue generation capabilities [63a5035f].
In summary, Nigeria's economic landscape is complex, with high inflation, modest growth prospects, and external pressures all contributing to the challenges ahead. The combination of these factors will be crucial as the country seeks to stabilize its economy and improve living conditions for its citizens [63a5035f][a83251b6].