Emmanuel OchayiThe Central Bank of Nigeria (CBN) has revealed that businesses and households expect inflation to decline over the coming months. According to the CBN’s latest Inflation Expectation Report, a significant percentage of businesses and households foresee inflationary pressures easing in the near term.
The report shows that 50 per cent of businesses believe inflation will decline within the next month. The outlook for the next three months is even more optimistic, with 52.9 per cent of business respondents expecting a reduction in inflation. However, over a six-month period, optimism wanes slightly as only 46.5 percent of businesses believe inflation will reduce.
Join our WhatsApp ChannelHouseholds share a similar outlook, with 70.8 per cent expecting inflation to decline in the next month. Over a three-month period, 66 percent of household respondents anticipate a drop in inflation, while 62.5 percent believe the downward trend will continue over six months.
Calls for Lower Interest Rates
The CBN’s report also highlights calls from businesses and households for a reduction in interest rates. According to the survey, 68.5 percent of respondents want the CBN to reduce the Monetary Policy Rate (MPR), which currently stands at 27.5 percent. This rate, which has been raised by 875 basis points since 2024, was introduced as part of efforts to control inflation and stabilize the economy.
Many respondents are also actively following CBN’s communications, with 98.9 percent tracking updates on monetary policies. Businesses have argued that lower interest rates would ease the cost of borrowing and help them manage rising operational expenses.
Current Inflation Trends in Nigeria
The National Bureau of Statistics (NBS) recently reported that Nigeria’s headline inflation rate rose to 33.88 percent in October 2024, up from 32.70 percent in September. The increase has been attributed to rising food prices and transportation costs, which have become a burden on businesses and households alike.
This rise in inflation has prompted growing concerns about the cost of living and the cost of doing business in the country. Business owners have reported higher operational costs, with many anticipating increased expenditure in the months ahead. According to the CBN’s survey, 60 percent of firms expect their operating expenses to rise in the next six months, reflecting the pressures caused by elevated prices.
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Economic Challenges and Expert Insights
The Economic Intelligence Unit (EIU) has stated that Nigeria’s business environment will remain challenging over the next five years. The EIU noted that, while recent economic reforms have the potential to produce long-term benefits, short-term difficulties such as inflation and a declining US dollar market size are likely to persist.
“In the early part of the forecast period, Nigeria will grapple with high inflation, a collapse in US dollar market size, an overstretched fiscal position, and sluggish output,” the EIU said.
These predictions echo the concerns raised by businesses in the CBN’s report, as many companies are bracing for higher costs. Rising inflation and increased interest rates have significantly increased the cost of doing business, especially in sectors like manufacturing, retail, and services.
CBN’s Response and Future Outlook
The Cardoso-led Monetary Policy Committee (MPC) at the CBN has maintained a tight monetary policy stance in a bid to stabilise the economy and control inflation. The increase of the MPR to 27.5 percent was aimed at reining in inflationary pressures, but businesses have argued that it has had the unintended consequence of raising borrowing costs and operational expenses.
With the CBN’s report now highlighting calls for a review of this policy, it remains to be seen if the MPC will adjust its approach. Businesses, households, and economic analysts will be watching closely for any signs of policy shifts in the coming months.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
