The NESG-Stanbic IBTC Business Confidence Monitor (BCM) report has projected that Nigeria’s inflation rate will decline to 27.1% by December 2025, providing a glimmer of hope for businesses and consumers grappling with persistent economic challenges.
This forecast reflects a cautious optimism about the gradual stabilization of Nigeria’s economy as structural reforms begin to take effect, despite ongoing headwinds.
Inflation has been a persistent challenge for Nigeria’s economy, with rising fuel prices and currency depreciation driving up costs across all sectors.
The report noted that inflationary pressures were particularly pronounced in 2024, following the removal of fuel subsidies and the liberalization of the foreign exchange market. However, it projects a gradual easing of inflationary pressures in 2025.
The report forecasts that headline inflation will remain elevated during the first nine months of the year but will decline significantly in the fourth quarter.
By December 2025, inflation is expected to settle at 27.1%, down from an average of 30.5% year-on-year. This decline will likely be driven by the normalization of petrol prices, improved exchange rate stability, better fiscal management, and increased agricultural output.
It read, “We expect headline inflation to remain sticky in 9M:25 but settle below 30.0% 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% y/y in 2025 and settle at 27.1% by December 2025.”
The easing of inflation is also expected to influence monetary policy. The Central Bank of Nigeria’s Monetary Policy Committee (MPC) may adopt a more accommodative stance in late 2025, potentially lowering interest rates to stimulate economic activity. This shift would mark a departure from the current tight monetary policy regime aimed at controlling inflation.
Business performance sees seasonal improvement
The NESG-Stanbic IBTC BCM highlighted that business performance in Nigeria showed slight signs of recovery in December 2024, driven largely by seasonal festive demand. The Current Business Performance Index, which measures the level of economic activity across sectors, rose to +0.77, compared to -2.74 in November.
- This improvement marked the first positive reading since September 2024, indicating a modest uplift in business activity during the festive period.
- Despite this seasonal boost, the performance across sectors was mixed. The agricultural sector led the way, achieving a net balance of +13.93, fueled by heightened activity during the harvest season and increased demand for agricultural produce.
- Non-manufacturing industries also showed resilience, with a net balance of +5.80. However, the manufacturing, trade, and services sectors continued to struggle. Manufacturing recorded a net balance of -2.43, trade fell to -5.59, and services experienced a decline of -3.46.
These figures underscore the uneven nature of the recovery, as certain sectors grappled with structural constraints such as high input costs and subdued consumer demand.
Cautious optimism amid persistent challenges
Business confidence, as reflected in the Future Business Expectation Index, remained cautiously optimistic for the coming months. The index settled at +28.61 in December 2024, a slight decline from +33.17 in November, but still indicative of positive sentiment.
- Businesses across various sectors expressed hopes for better conditions in the first quarter of 2025, particularly in agriculture, manufacturing, and non-manufacturing industries.
- The report identified several challenges that tempered business optimism. High operational costs, exacerbated by elevated exchange rates and inflation, continued to erode profitability. Frequent power shortages forced many firms to rely on expensive alternative energy sources, significantly increasing production costs.
Insecurity, limited access to financing, and the complexity of multiple tax regulations further compounded the difficulties faced by businesses. While access to credit improved slightly in December, with a net balance of +8.25, the high cost of borrowing remained a critical barrier to investment and expansion.
Structural challenges hampering business growth
While the forecast for inflation and business confidence provides some optimism, the report underscored the persistent structural challenges that continue to hinder economic growth.
The Cost of Doing Business Index surged by +50.32 in December, reflecting mounting pressures on firms.
High energy costs, frequent power outages, and regulatory complexities have significantly impacted business operations.
Many businesses reported that these constraints forced them to scale back investment plans, with a net balance of -31.46 recorded for investment activity in December.
- Frequent power shortages were identified as the most pressing issue, compelling many firms to rely on expensive diesel generators. Additionally, the high exchange rate of the naira against global currencies drove up import costs, further straining profitability. These challenges have created an environment where businesses are forced to focus on survival rather than expansion.
- Despite these challenges, the report offered a cautiously optimistic outlook for Nigeria’s economic growth in 2025. GDP is projected to grow by 3.5% in 2025, up from an estimated 3.2% in 2024.
This growth will likely be supported by improved conditions in key sectors such as agriculture, manufacturing, and non-manufacturing industries.
The easing of inflation and the stabilization of foreign exchange rates are expected to bolster consumer spending, providing a further boost to economic activity.
Tobi Tunji
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