World Bank projects Nigeria’s inflation to fall to 14.3% on reforms

The World Bank expects Nigeria’s inflation to drop to 14.3 percent by 2027 as the country stays on course in its ongoing macroeconomic reforms that have elevated prices and deepen poverty.

In its new Nigeria Development Update report, the Washington-based lender said headline inflation is projected to peak at an average annual rate of 31.7 percent in 2024, largely driven by the depreciation of the naira and increased gasoline prices.

“In the medium term, recent macroeconomic reforms and their continuation will help to reduce inflation, expected to fall to 14.3 percent by 2027,” the World Bank said.

The Bank admits that though the fiscal reforms are painful, they are needed from saving the country from imminent collapse and have begun to yield results.

Nigeria’s inflation after reaching a 28-year high of 34.2 percent in June 2024, began to decelerate in July and fell to 32.15 percent in August, fanning hope of respite for households and firms who have seen their purchasing power shrunk and gains eroded.

But the spike has begun again as September data surged to 32.7 percent on the back of the about 50 percent new total increase in petrol prices across the country.

This development, according to many analysts, will further stoke prices and raise the burden of the already burdened ordinary Nigerians who are most squeezed by the pump price.

Nigerians are now grappling with rising energy costs, soaring food prices and transportation fare and a depleting consumer spending.

But the World Bank said “a series of macroeconomic policy missteps in 2015-
2023 contributed to an inflation surge in Nigeria”.

According to the report, headline inflation was broadly stable up until 2014, in high single digits or low two digits, not so distant from the levels observed in other major emerging markets.

It however stated that from 2015, when the CBN shifted its primary focus away from price stability – its core mandate, money supply began to rise that between 2015 and 2023, the confidence in the naira had already been sapped, pushing up inflation.

“As a result, inflation was surging, even before the series of reforms which began in mid-2023, reaching 22.4 percent yoy in May 2023,” the report stated.

In its forecast, the Bretton Woods institution anticipates Nigeria’s inflation to begin to moderate, declining to 23.5 percent by 2025, 18.1 percent by 2026 and consequently 14.3 percent by 2027.