The World Bank projects a potential easing of Nigeria's persistent inflationary pressures, forecasting an average inflation rate of 22.1 per cent in 2025. This optimistic outlook, detailed in the latest Nigeria Development Update report launched in Abuja on Monday, hinges on the Central Bank of Nigeria's (CBN) determined tight monetary policy stance, aimed at reining in soaring prices and stabilizing inflation expectations.
Inflation Remains a Key Concern Despite Macroeconomic Improvements
The biannual report, themed "Building Momentum for Inclusive Growth," offers a comprehensive assessment of Nigeria's recent economic trajectory and policy responses, while also outlining crucial priorities for sustaining ongoing reforms and fostering growth that benefits all segments of society. While the World Bank acknowledges significant improvements in key macroeconomic indicators, including Gross Domestic Product (GDP) growth, revenue mobilization, and fiscal consolidation, it underscores that headline inflation remains a critical challenge for the Nigerian economy.
"The report further adds that inflation has remained high and sticky but is expected to fall to an annual average of 22.1 per cent in 2025, as a sustained tight stance firmly establishes monetary policy credibility and dampens inflationary expectations," the World Bank stated.
Drivers of Inflation and the CBN's Response
The World Bank identified several factors that have fueled Nigeria's elevated inflation in recent years. These include the removal of long-standing petrol subsidies, the unification of exchange rates, increasing logistics and energy costs, and recurring disruptions to food supply chains.
However, the report notes a turning tide, suggesting that the CBN's current aggressive monetary tightening measures are beginning to yield positive results. This sustained tightening is anticipated to gradually alleviate the intense inflationary pressures as Nigeria moves into 2025.
Macroeconomic Picture Shows Signs of Strengthening
Beyond the inflation outlook, the Nigeria Development Update paints a picture of a steadily improving macroeconomic environment. The Nigerian economy demonstrated robust growth, expanding by 4.6 per cent year-on-year in the fourth quarter of 2024. This performance propelled the full-year growth to 3.4 per cent, marking the strongest growth rate since 2014, excluding the post-COVID-19 rebound.
Fiscal performance also exhibited a significant upturn. The consolidated fiscal deficit narrowed considerably from 5.4 per cent of GDP in 2023 to 3.0 per cent in 2024. Simultaneously, total government revenues witnessed a substantial increase, rising from N16.8 trillion in 2023 to an estimated N31.9 trillion in 2024, equivalent to 11.5 per cent of GDP.
Opportunity for Strategic Public Spending
The World Bank emphasizes that this improved fiscal outlook presents Nigeria with a crucial window of opportunity to strategically restructure public spending. This entails shifting resources towards impactful investments in vital social infrastructure.
Taimur Samad, the acting World Bank Country Director for Nigeria, highlighted this potential. "Nigeria has made impressive strides to restore macroeconomic stability. With the improvement in the fiscal situation, Nigeria now has a historic opportunity to improve the quantity and quality of development spending; investing more in human capital, social protection, and infrastructure," he stated.
Samad further stressed the need to move away from unsustainable public resource allocation patterns of the past, redirecting funds to address critical development deficits. The World Bank also underscored that achieving long-term inclusive growth necessitates accelerating productivity in sectors capable of generating jobs on a large scale.
The Role of the Private Sector in Sustainable Growth
The report observed that while sectors like finance and ICT have shown strong performance, they are not particularly labor-intensive and tend to exclude a significant portion of the Nigerian population due to limited access and skills.
Alex Sienaert, the World Bank Lead Economist for Nigeria, emphasized the limitations of public sector-led growth. "International experience suggests that the public sector cannot sustainably generate growth and jobs by itself. Nigeria is no exception," he said.
Sienaert proposed a dual role for the public sector: as a provider of essential public services and as a facilitator for private sector investment, innovation, and economic growth.
Background: Nigeria's Persistent Inflation
It is important to note that the World Bank's projection comes against a backdrop of stubbornly high inflation in Nigeria. The most recent data from the National Bureau of Statistics indicates that Nigeria's headline inflation climbed to 24.23 per cent in March 2025, an increase from the 23.18 per cent recorded in February. This highlights the ongoing challenge the CBN faces in its efforts to achieve price stability and underscores the significance of a sustained and credible monetary policy stance as emphasized by the World Bank.
The Nigeria Development Update remains a key publication for understanding the economic dynamics of Africa's largest economy, offering regular analysis of trends, reforms, and potential risks.
The World Bank's latest report provides a cautiously optimistic outlook for inflation in 2025, contingent on the continued effectiveness and credibility of the CBN's monetary policy measures, while also highlighting the critical need for strategic public spending and private sector engagement to achieve sustainable and inclusive growth.