Nigeria’s economic landscape presents a mixed picture of progress and persistent challenges. While the World Bank acknowledges significant improvements in macroeconomic indicators such as GDP growth, revenue mobilization, and fiscal consolidation, the specter of high inflation continues to loom large. Projected to average 22.1% in 2025, inflation remains a pressing concern, albeit with expectations of gradual easing due to the Central Bank of Nigeria’s (CBN) tight monetary policy stance. This policy aims to restore price stability and anchor inflation expectations, acting as a crucial lever in navigating the complex economic terrain. The World Bank’s latest Nigeria Development Update, titled “Building Momentum for Inclusive Growth,” provides a comprehensive assessment of these economic dynamics, offering insights into recent trends, policy responses, and priorities for future reforms.
The report highlights the complex interplay of factors driving Nigeria’s elevated inflation. The removal of petrol subsidies, a move aimed at fiscal consolidation, has contributed to rising prices. Similarly, the unification of exchange rates, while intended to streamline the foreign exchange market, has also played a role in inflationary pressures. Further exacerbating the situation are rising logistics and energy costs, coupled with recurring disruptions to food supply chains, which have added upward pressure on food prices. These factors, acting in concert, have created a challenging inflationary environment that necessitates a robust policy response.
Despite these challenges, the CBN’s monetary tightening measures are beginning to yield positive results. The World Bank projects a gradual decline in inflation towards 2025, anticipating that the sustained tight stance will establish monetary policy credibility and dampen inflationary expectations. This projected easing of inflation, coupled with positive growth trends, paints a cautiously optimistic picture for Nigeria’s economic outlook. The economy experienced a 3.4% growth in 2024, the strongest performance since 2014 excluding the post-COVID rebound, further bolstering this optimism.
Fiscal performance has also shown marked improvement, providing a critical window of opportunity for strategic investment. The consolidated fiscal deficit narrowed significantly, from 5.4% of GDP in 2023 to 3.0% in 2024, alongside a substantial increase in government revenues. This improved fiscal space allows for a restructuring of public spending, enabling impactful investments in crucial areas such as human capital, social protection, and infrastructure. The World Bank emphasizes the importance of shifting away from past unsustainable spending patterns and prioritizing investments that address critical development gaps, laying the foundation for long-term inclusive growth.
However, achieving sustainable and inclusive growth necessitates a broader approach that extends beyond fiscal consolidation and monetary policy. The World Bank underscores the importance of accelerating productivity in job-creating sectors. While sectors like finance and ICT have demonstrated strong performance, their limited labor intensity and accessibility exclude a significant portion of the population. Bridging this gap requires strategic interventions to enhance skills development and broaden access to these growth sectors. The report advocates for a dual role for the public sector, both as a provider of essential public services and as an enabler of private sector investment, innovation, and growth.
The World Bank’s analysis emphasizes the interconnectedness of various economic factors and the need for a holistic approach to development. While acknowledging the progress made in restoring macroeconomic stability, the report stresses the importance of strategic public spending, private sector engagement, and targeted interventions to address structural challenges. These recommendations, coupled with the CBN’s continued efforts to manage inflation, offer a roadmap for navigating the complex economic landscape and fostering sustainable, inclusive growth in Nigeria. The ultimate success of these efforts hinges on effective implementation and continuous monitoring of the evolving economic dynamics. Despite the positive trajectory, the recent uptick in inflation to 24.23% in March 2025 serves as a reminder of the persistent challenges and the need for continued vigilance in managing inflationary pressures.
