According to the latest NESG-Stanbic IBTC Business Confidence Monitor report, Nigeria’s inflation rate is projected to decline to 27.1 per cent by December 2025. This forecast has boosted high hope to businesses owners and consumers struggling with prolonged economic difficulties, as it suggests that structural reforms are beginning to yield positive results despite lingering challenges. Inflation remains a serious bend for Nigeria’s economy, following the removal of fuel subsidy that has affected the price of every commodity and currency depreciation that plunged after floating the naira by president Tinubu is driving up expenses across all sectors.
Close examination of the report revealed that inflationary pressures were principally acute in 2024, following the removal of fuel subsidies and the liberalisation of the foreign exchange market.
However, the BCM anticipates a gradual easing of these pressures come 2025.
According to the report forecasts that headline inflation will remain elevated through the first nine months of 2025 but expected to decline significantly in the fourth quarter.
The report stated, “We expect headline inflation to remain sticky in 9M:25 but settle below 30.0 per cent from September 2025 as high petrol cost gets smoothened out of the year-on-year headline inflation, barring any unexpected negative shocks to petrol prices.
“This expectation, in addition to our prognosis on the USD/NGN pair, fiscal deficits, and food supplies, informs our forecast that the headline inflation may average 30.5 per cent y/y in 2025 and settle at 27.1 per cent by December 2025.”
Accordingly, monetary policy is also expected to be affected positively as the Central Bank of Nigeria’s Monetary Policy Committee may adopt a more accommodative stance in late 2025, potentially reducing interest rates to stimulate economic activity.
The report further highlighted that business performance in December 2024 experienced a slight recovery due to seasonal festive demand.
The Current Business Performance Index, which measures economic activity across sectors, rose to +0.77, an improvement from -2.74 recorded in November.
This marked the first positive reading since September 2024, reflecting a modest uplift in business activity.
However, the overall performance across sectors was irregular. Agriculture emerged as the top-performing sector with a net balance of +13.93, spurred by heightened harvest activities and increased demand for produce.
Non-manufacturing industries also showed resilience, recording a net balance of +5.80. In contrast, the manufacturing, trade, and services sectors faced significant challenges.
The Future Business Expectation Index, which reflects optimism about future business conditions, was put at +28.61 in December 2024, slightly moved down from +33.17 in November.
Despite the decline, the index still indicates cautious optimism among businesses for improved conditions in the first quarter of 2025, particularly in agriculture, manufacturing, and non-manufacturing sectors.
Part of the challenges that affected business optimism includes high operational costs exacerbated by inflation and exchange rate fluctuations.
Unabated power outages have remained a critical issue, compelling many firms to depend on expensive alternative energy sources like diesel and PMS. Insecurity, limited access to financing, and cumbersome tax regulations further compounded the difficulties encountered by businesses.
Although access to credit improved modestly in December, with a net balance of +8.25, the high cost of borrowing continued to act as a barrier to investment.
Part of the report also highlighted constant structural challenges hampering economic growth. The Cost of Doing Business Index surged by +50.32 in December, reflecting the mounting pressures on firms.
Despite these challenges, the report offered a cautiously optimistic outlook for economic growth in 2025.
Meanwhile, Nigeria’s GDP is projected to grow by 3.5 per cent in 2025, up from an estimated 3.2 per cent in 2024.
This growth therefore is expected to be driven by improved conditions in key sectors such as agriculture, manufacturing, and non-manufacturing industries.
Easing of inflation and the stabilisation of exchange rates are anticipated to strengthen consumer spending and economic activity.
