Nigeria’s economic landscape is experiencing a notable shift towards disinflation, with the Independent Media and Policy Initiative (IMPI) projecting a decline in the inflation rate to 17% by December 2025. This optimistic outlook follows the latest inflation data released by the National Bureau of Statistics, which revealed a drop from 21.88% in July to 20.12% in August. IMPI attributes this positive trend to a confluence of factors, including the Central Bank of Nigeria’s (CBN) stringent monetary policy, increased foreign exchange inflow, and improved agricultural output. The think tank’s analysis indicates that the current disinflationary phase marks a significant departure from the inflationary pressures witnessed between 2020 and 2024, aligning more closely with the trends observed in 2017 and 2018. This deceleration in inflation signifies a rare and sustained slowdown in consumer prices, a phenomenon not frequently observed in Nigeria’s recent economic history.
IMPI’s assessment highlights the effectiveness of the CBN’s decision to maintain a benchmark interest rate of 27.50%, which has effectively curbed credit demand and speculative activities in the foreign exchange market. Coupled with this, a surge in foreign exchange reserves, driven by increased oil revenues, remittances, and non-oil export earnings, has contributed to the stabilization of the naira. Furthermore, favorable harvests and a relative calm in key food-producing regions have eased pressure on food prices, a significant driver of inflation in the country. The combined impact of these factors has positioned the inflation rate below the CBN’s initial target of 21%, paving the way for a potential further decline to 17% by the end of 2025, closer to the federal government’s target of 15%.
The projected decline in inflation has significant implications for Nigeria’s macroeconomic outlook. IMPI anticipates that the CBN’s Monetary Policy Committee will respond to the disinflationary trend by easing the current monetary policy rate by at least 50 basis points at its upcoming meeting and potentially by as much as 200 basis points by December 2025. Furthermore, the think tank projects a review of the cash reserve ratio, potentially lowering it from 50% to 35% by December 2025. These adjustments are expected to reduce the cost of borrowing, stimulate business expansion, and generate employment opportunities by increasing the availability of credit and enhancing the capacity of money deposit banks to fulfill their financial intermediary roles.
The positive economic trajectory is further underscored by the resurgence of several major Nigerian businesses that had previously experienced losses following the government’s decision to float the naira. IMPI notes that seven prominent companies, which collectively reported a loss of N418 billion in the first quarter of 2024, rebounded with a combined pre-tax profit of N289.8 billion in the first quarter of 2025. This turnaround continued into the second quarter of 2025, with these companies achieving a combined pre-tax profit of approximately N264 billion. This remarkable recovery underscores the positive influence of currency stability and effective internal cost control measures in mitigating the impact of macroeconomic headwinds.
The convergence of these positive indicators – declining inflation, stabilizing currency, and improving corporate performance – paints a picture of increasing economic stability in Nigeria. IMPI’s analysis suggests that the proactive measures implemented by the CBN and the government are yielding positive results, creating a more conducive environment for businesses to thrive and laying the groundwork for sustainable economic growth. This positive momentum is attracting the attention of both domestic and international observers, who are increasingly recognizing the stabilizing trend in the Nigerian economy.
The IMPI’s optimistic forecast, grounded in data-driven analysis and supported by observable market trends, suggests that Nigeria is on a path toward achieving greater economic stability. The projected decline in inflation, coupled with the anticipated easing of monetary policy, promises to unlock new opportunities for businesses, stimulate investment, and create jobs. While challenges undoubtedly remain, the current disinflationary trend and the resilience demonstrated by Nigerian businesses signal a positive shift in the country’s economic narrative, offering a hopeful glimpse into the future.
