The World Bank has estimated that Nigeria’s inflation rate will drop to around 24.8% this year and further to 15.1% by 2026. It noted that the projected decline was premeditated on monetary policy tightening and exchange rate stabilisation in Nigeria.
The World Bank, in its latest publication entitled, “African Pulse,” detailed the issues shaping African economies in 2024 and beyond, noting that reforms will spur growth in Nigeria.
The global lender specified that the non-oil sector will see slow growth unless adequate structural reforms are put in place.
- It stated, “Growth in Nigeria is projected at 3.3% in 2024 and 3.6% in 2025–26 as macroeconomic and fiscal reforms gradually start to yield results. Structural reforms will be needed to foster higher growth. Average inflation will remain elevated at 24.8% in 2024, although it is expected to ease gradually to 15.1% by 2026 on the back of monetary policy tightening and exchange rate stabilization.”
The report noted that Nigeria’s growth projects are too low when compared with its peers across West and Central Africa.
Causes of inflation in SSA
Furthermore, the Bretton Wood institute stated that elevated food prices and local currency weakness are major drivers of inflation in Sub-Saharan Africa (SSA), with a third of the countries in the region experiencing double-digit food inflation.
The global lender attributed the high food inflation across the SSA to adverse effects of climatic conditions like the El Nino weather conditions and flooding, together with geopolitical tensions in the Middle East and Europe.
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Insights
Nigeria’s inflation rate reached 31.70% in February 2024, according to the National Bureau of Statistics (NBS), with food inflation at 37.92%- a 27yr high. The country’s inflation rate has been on the rise since January 2023.
- Analysts have stated that Nigeria’s inflation is majorly propelled by rising food prices, especially staple foods such as grains, with insecurity, increased energy and transportation costs the major culprits.
- However, the Central Bank of Nigeria (CBN) has blamed increased money supply and weakening of the naira as some of the culprits in Nigeria’s elevated inflation rate. To combat this, the CBN has deployed certain tools from its monetary policy arsenal, including raising the Cash Reserve Ratio (CRR) of banks to 45 percent from 32.5% in February 2024 – as a move to suck up cash excess cash in circulation.
- In 2024, Nigeria’s apex bank has increased the Monetary Policy Rate (MPR) by 600% basis points to 75% with taming inflation the sole target.