Emmanuel OchayiAs Nigeria enters a critical phase of economic adjustment, experts have provided forecasts that could shape the year ahead. They Predicted that inflation may begin to moderate, causing ease cycle and the rebound of the naira.
Speaking at the First Bank’s outlook event titled “Nigeria 2025: Path to Economic Rebound & Recovery” in Lagos, renowned economist, Bismarck Rewane, shared his views on the country’s inflation trajectory.
Join our WhatsApp ChannelInflation May Moderate by Year-End
Rewane stated that although inflation has significantly strained household incomes and eroded business gains, there is a possibility of moderation. He projected that inflation could decrease to about 25 or 27 percent by the end of the year if certain favorable conditions align. This would mark a decline from the current high levels, though still far from ideal.
He warned, however, that the expected decrease in inflation would not be as significant as previously hoped. “The moderation in inflation is not going to be as low as we expected,” Rewane said, suggesting that monetary policymakers might hold off on lowering borrowing costs until there’s a clearer reduction in inflation rates.
Central Bank’s Response to Rising Prices
Consumer prices in Nigeria have soared, reaching a three-decade high of 34.6 percent in November as reported by Prime Business Africa. In response, the Central Bank of Nigeria increased key interest rates to 27.5 percent to control the surge. This hawkish stance is expected to continue until there’s a tangible decline in inflation.
Ifeoluwa Dixon, head of fixed income solutions at FBNQUEST Asset Management, emphasised that the monetary policy’s current direction is unlikely to change in the first half of the year. “We do not expect the hawkish stance of the monetary policy to trend downwards in the first half of the year,” Dixon noted, predicting a moderation in both inflation and interest rates around mid-Q3 of 2025.
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Naira’s Rebound and Future Outlook
Biodun Adedipe, founder and chief consultant at B.Adedipe Associates Limited, provided insights into the naira’s potential performance. He anticipated a slight depreciation in the naira’s value, predicting an average exchange rate of N1,574.4 to $1 in 2025. Despite this, he forecasted inflation to drop to 33 percent by the end of 2024 and further down to 27 percent in 2025.
The naira, which suffered a 41 percent loss in value throughout 2024, has shown signs of recovery. Following the introduction of the Electronic Foreign Exchange Matching System (EFEMS), the naira appreciated by N125 to a dollar, a development analysts view as the beginning of a potential rebound.
What This Means for Nigeria’s Economy
The anticipated moderation in inflation, coupled with a gradual strengthening of the naira, suggests a cautiously optimistic outlook for Nigeria’s economy. If these predictions hold, the easing of inflation could pave the way for lower interest rates, fostering a more favourable business environment.
Stock Market’s Potential Reaction
While the stock market’s exact reaction to these economic predictions remains to be seen, a decrease in inflation and a stronger naira could positively impact investor confidence. The moderation of interest rates might also encourage more investment in various sectors, potentially boosting overall economic growth.
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.
