Mr. Wale Edun
The Independent Media and Policy Initiative (IMPI) is projecting that Nigeria’s headline inflation will further drop to 17 per cent by December 2025 after consecutive declines that took the figure to 20.12 per cent in August.
The think tank also expects the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to reduce the monetary policy rate (MPR) at its next meeting in response to five consecutive month-on-month drops in inflation.
In its latest policy statement, signed by its Chairman, Dr Omoniyi Akinsiju, IMPI explained that the country is experiencing a lengthy period of disinflation.
It said: “We have observed how some critics have dismissed the decline in the inflation rate as being of no consequence to the people, insisting dismissively that prices have not changed in any way to affect the mass of the Nigerian people.
”We consider this an expression of the intention not to acknowledge the federal administration’s positive strides. Empirically speaking, the Nigerian economy is now in a disinflationary dispensation. Disinflation is a temporary slowing of the pace of price inflation and is used to describe instances when the inflation rate has reduced marginally over the short term.
”Nigeria recorded a rare disinflation in 2025, with inflation falling from 24.5 per cent in January to 20.12 per cent in August, about a 17.5 per cent drop, the sharpest mid-year slowdown in over a decade. An analysis of 10 years of data shows that, unlike 2020–2024, when inflation accelerated, 2025 stands out alongside 2017 and 2018 as one of the few disinflationary years.
”Accordingly, Nigeria’s inflation story in 2025 is taking an unusual turn because, for the first time in nearly a decade, the country is witnessing a meaningful and sustained slowdown in consumer prices. In relative terms, that is a 17.5 per cent reduction compared to the January level, a pace of disinflation rarely seen in Nigeria’s modern economic history.
”So far, we have witnessed how the inflation rate, instead of climbing, has steadily declined month after month (except for a brief uptick in March), ending August below 21 per cent, the first time in 16 months that headline inflation had fallen that low. ”
IMPI also identified factors which its analysts insist are responsible for the decline in headline inflation in recent months.
”Three key factors are shaping Nigeria’s inflation deceleration in 2025: CBN has kept rates at 27.50 per cent, slowing credit demands and speculative forex activities; stable foreign exchange rate due to increased foreign exchange inflow into the country through oil, remittances, and non-oil export earnings; and better harvests and relative calm in food-producing regions have eased food price pressure.
”At 20.12 per cent in August, the apparent indication is that the year-on-year inflation rate has fallen below the 21 per cent target set by the CBN. However, with the momentum being generated in the economy, we can also safely aver that inflation may decline to 17 per cent in December 2025, a target near the 15 per cent set by the federal administration. Attaining this target has huge microeconomic implications.”
”We can project that the Central Bank’s Monetary Policy Committee (MPC) will consider easing the current 27.50 per cent monetary policy rate (MPR) by at least 50 basis points at its next meeting and by at least 200 basis points by December 2025.
Similarly, we also project a review of the cash reserve ratio (CRR) from 50 per cent for bank deposits to 35 per cent by December 2025. This review will impact the cost of production, enhance business expansion, and create jobs because of the cheaper cost of credit and the quantum of cash available to money deposit banks to perform their financial intermediary roles,” it added.
IMPI also acknowledged that the rebound in the fortunes of some of Nigeria’s largest businesses after they had suffered losses in the aftermath of the federal government’s decision to float the naira.
”Like the removal of fuel subsidy, in June 2023, Nigeria floated the naira, marking a historic turning point in its foreign exchange regime. Shortly after, the naira experienced a steep depreciation, falling from about N460/$ in June 2023 to N1,535/$ by year-end 2024.
”This sharp depreciation exposed Nigerian companies to massive FX translation losses and rising interest burdens, which eroded shareholders’ value across the Nigerian Exchange.
”The pain was widespread but especially pronounced in the consumer goods and ICT sectors, where companies relied heavily on imported raw materials or carried substantial foreign-denominated loans. By Q1 2024, seven major listed consumer companies — BUA Foods, Cadbury Nigeria, International Breweries, Nigerian Breweries, NASCON Allied Industries, Dangote Sugar, and Nestlé Nigeria- reported a combined loss of N418 billion.
”Over the two years, these companies collectively lost N867 billion, dragged down by foreign exchange exposure and ballooning interest expenses. However, by the last quarter of 2024, signs of stability began to return to the economy.
”The foreign exchange market grew more orderly, with the naira settling into a relatively stable band. FX volatility eased, and market liquidity gradually improved.
”At the same time, companies adjusted their cost structures, refined pricing strategies, and restructured foreign obligations, creating a foundation for recovery. By the end of Q1 2025, that foundation began to yield results. After nearly two years of losses, the consumer goods sector posted a sharp turnaround in Q1 2025.
”The seven companies that had reported a combined loss of N418 billion in Q1 2024 returned to a combined pre-tax profit of N289.8 billion in Q1 2025. By the end of Q2 2025, all the consumer goods companies had returned to profitability with a combined pre-tax profit of about N264 billion.
”These sharp earnings reversal highlights how currency stability and internal cost controls can quickly shift the fortunes of companies previously dragged down by macroeconomic headwinds. This captures the context in which domestic and global commentators have returned a verdict of stability for the Nigerian economy,” IMPI said.
