Road To 15% Inflation: Ambitious Targets Or Achievable Goals In 2025?

Nigeria’s inflation reached a 28-year high of 34.6% in November 2024, leaving businesses and households grappling with soaring prices. The Federal Government has set an ambitious target to bring inflation down to 15% by 2025. But can this goal be achieved? Economists remain divided on whether the country’s current economic reforms are sufficient to combat inflation effectively.

Understanding Inflation in Nigeria

Inflation in Nigeria has consistently exceeded projections, fuelled by a mix of domestic and global challenges. Key drivers include rising food and fuel prices, currency depreciation, and excessive liquidity in the economy. Despite the Central Bank of Nigeria (CBN) hiking its benchmark interest rate from 18.75% in late 2023 to 27.5% this year, inflation continues to strain economic stability.

Olayemi Cardoso, CBN Governor, remains optimistic, stating, “The Monetary Policy Committee expects inflation to ease gradually from 2025 due to sustained monetary tightening measures.”

However, predictions by global institutions, such as the International Monetary Fund (IMF) and the African Development Bank, suggest inflation rates of 23% and 20.7% respectively in 2025. These figures underscore the challenges of achieving the government’s 15% target.

To explore the feasibility of this target, PrimeBusinessAfrica spoke with three experts who shared insights on Nigeria’s inflationary pressures and potential paths forward.

The Reforms Required for Economic Stability

Dr. Samuel Adebayo, an economist, stresses that addressing inflation’s root causes is crucial. “Without tackling high food prices, exchange rate volatility, and excess liquidity, the government’s projections are unlikely to materialise. Our VAR prediction model estimates inflation at 31% in 2025—a more realistic figure given current conditions,” Dr. Adebayo said.

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Drawing lessons from nations like Turkey and Argentina, economists emphasise the importance of fiscal discipline. Turkey’s success in halving its inflation from 83% to 47% within two years involved measures such as slashing public spending, boosting productivity, and tightening monetary policies. Nigeria could adopt similar strategies to curb inflationary pressures.

Foreign Investments and Structural Reforms

Another critical factor is attracting substantial foreign direct investment (FDI). Professor Kemi Onasanya, a financial analyst, argues that FDI inflows are essential for stabilising the economy and achieving lower inflation rates.

“Five percent inflation is possible if we attract $50 billion in FDI within a year. This would stabilise the exchange rate and reduce inflation drastically,” Prof. Onasanya explained.

However, he criticised the government’s reliance on debt financing, calling it unsustainable.

“They said they wouldn’t borrow, but borrowing continues. We need to focus on equity-based financing and issue higher-grade debt instruments to secure lower interest rates. Otherwise, inflationary pressures will persist,” he warned.

The Lessons from Global Examples

Countries like Indonesia offer valuable lessons in managing inflation effectively. By regulating prices, maintaining steady supply chains, and ensuring adequate stock levels, Indonesia managed to control inflation at 5.95% during global disruptions.

Yvonne Mhango, Africa economist at Bloomberg Economics, believes Nigeria could follow a similar path. “We expect price gains to moderate from January, albeit at a slow pace. Rate hikes will persist until real rates are restored, likely by Q3 2025,” she said.

However, she cautioned that sustained reforms and economic diversification would be required to achieve long-term stability.

Can Nigeria Achieve Its Inflation Goals?

While the government’s target of 15% inflation by 2025 is ambitious, experts agree that it is not entirely out of reach if the right policies are implemented. Key measures include:

• Strengthening monetary policies to control liquidity.
• Boosting foreign exchange reserves.
• Diversifying the economy to reduce reliance on imports.
• Enhancing institutional transparency.

As Milton Friedman famously noted, “Inflation is taxation without legislation.” For Nigeria, reducing inflation is not just an economic challenge but a moral imperative to protect citizens’ livelihoods.

Dr. Samuel Adebayo summed it up aptly: “Achieving 15% inflation requires a coordinated effort across fiscal and monetary policy. Without bold reforms, this target will remain elusive.”

A Path Forward with Challenges

Nigeria’s journey to achieving its 15% inflation target by 2025 hinges on decisive action. While the road ahead is fraught with challenges, adopting strategic reforms and learning from global experiences could pave the way for economic stability.

The government must act swiftly to translate its ambitions into reality, ensuring that it does not continue to erode the nation’s economic foundations.