The Nigerian Economic Summit Group (NESG) and Stanbic IBTC Bank have released their Business Confidence Monitor (BCM) report, projecting a gradual decline in Nigeria’s inflation rate to 27.1% by December 2025. This forecast, while offering a glimmer of hope for businesses and consumers grappling with persistent economic challenges, comes amidst a backdrop of ongoing headwinds.
Inflationary Pressures Easing, but Remain Elevated
Inflation has been a persistent scourge on the Nigerian economy, with rising fuel prices and currency depreciation driving up costs across all sectors. The report acknowledged the significant inflationary pressures experienced in 2024, particularly following the removal of fuel subsidies and the liberalization of the foreign exchange market. However, it projects a gradual easing of these pressures in the coming year.
“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,” the report stated.
This projected decline in inflation is expected to be driven by several factors, including the normalization of petrol prices, improved exchange rate stability, better fiscal management, and increased agricultural output.
Monetary Policy Shift on the Horizon?
The easing of inflationary pressures may also influence the monetary policy stance of the Central Bank of Nigeria (CBN). The report suggests that the CBN’s Monetary Policy Committee (MPC) may adopt a more accommodative stance in late 2025, potentially lowering interest rates to stimulate economic activity. This would mark a departure from the current tight monetary policy regime primarily aimed at controlling inflation.
Business Performance Shows Signs of Recovery, but Challenges Persist
The NESG-Stanbic IBTC BCM report noted that business performance in Nigeria showed slight signs of recovery in December 2024, primarily driven 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.
While this marked a positive turn, the performance across sectors was uneven. The agricultural sector led the way, fueled by heightened activity during the harvest season. However, manufacturing, trade, and services sectors continued to struggle.
Business Confidence Remains Cautious
Despite the slight improvement in business performance, business confidence, as reflected in the Future Business Expectation Index, remained cautiously optimistic. While the index declined slightly from November, it still indicated positive sentiment among businesses.
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However, several challenges continue to temper business optimism. High operational costs, exacerbated by elevated exchange rates and inflation, remain a major concern. Frequent power outages force 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 compound the difficulties faced by businesses.
Cost of Doing Business Remains High
The report highlighted a significant surge in the Cost of Doing Business Index in December, reflecting the 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. 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.
Economic Growth Forecast
Despite these challenges, the report offered a cautiously optimistic outlook for Nigeria’s economic growth in 2025, projecting a growth rate of 3.5%. 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.
If You Ask Me
The NESG-Stanbic IBTC BCM report provides a mixed picture of the Nigerian economy. While the projected decline in inflation offers a glimmer of hope, businesses continue to grapple with significant challenges. The report underscores the need for concerted efforts to address these challenges, including improving infrastructure, enhancing access to finance, and creating a more conducive business environment.
