The World Bank has projected a notable decline in Nigeria’s inflation rate, anticipating it to decrease to approximately 24.8 per cent in the current year, with a further drop to 15.1 per cent by 2026. This estimation hinges on the implementation of monetary policy tightening measures and stabilisation of the exchange rate within Nigeria.
In its recent publication titled: “African Pulse,” the World Bank outlined key factors shaping African economies beyond 2024. It emphasised that effective reforms will be instrumental in driving growth within Nigeria. However, the report cautioned that without adequate structural reforms, growth in the non-oil sector is likely to remain sluggish.
The World Bank’s report specified, “Growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025–26 as macroeconomic and fiscal reforms gradually start to yield results. Structural reforms will be needed to foster higher growth. Average inflation will remain elevated at 24.8 per cent in 2024, although it is expected to ease gradually to 15.1 per cent by 2026 on the back of monetary policy tightening and exchange rate stabilisation.”
Additionally, the report highlighted that Nigeria’s growth prospects lag behind those of its peers in West and Central Africa.
The World Bank identified elevated food prices and local currency depreciation as significant drivers of inflation across Sub-Saharan Africa (SSA). Approximately one-third of countries in the region are experiencing double-digit food inflation. Climatic conditions such as El Nino and flooding, coupled with geopolitical tensions in the Middle East and Europe, were cited as contributing factors to high food inflation.
Nigeria’s inflation rate surged to 31.70 per cent in February 2024, according to data from the National Bureau of Statistics (NBS), with food inflation hitting a 27-year high at 37.92 per cent. The inflationary trend has been on the rise since January 2023.
Analysts attribute Nigeria’s inflation primarily to escalating food prices, particularly staple foods like grains, exacerbated by factors such as insecurity and increased energy and transportation costs.
However, the Central Bank of Nigeria (CBN) has identified increased money supply and currency devaluation as key contributors to the country’s elevated inflation rate. To address this issue, the CBN has implemented various monetary policy tools, including raising the Cash Reserve Ratio (CRR) for banks to 45 per cent from 32.5 per cent as of February 2024, aimed at mopping up excess liquidity from circulation.
In 2024, the CBN significantly raised the Monetary Policy Rate (MPR) by 600 basis points to 75 per cent, with inflation containment as its primary objective.
