Inflation, monetary policy rate to decline as naira stabilises in 2025
After years of economic turbulence, Nigeria’s financial outlook for 2025 is beginning to look promising, with experts predicting a stabilisation of the naira, a decline in inflation, and a reduced Monetary Policy Rate (MPR).
These optimistic projections stem from a combination of economic reforms, enhanced foreign exchange inflows, and strategic fiscal policies implemented in late 2024.
Economists and analysts who spoke at the First Bank outlook entitled ‘Nigeria 2025: Path to Economic Rebound & Recovery’ on Wednesday in Lagos said the rebound of the economy may come later in the year.
An economist and CEO of Financial Derivatives Company, Bismarck Rewane, said inflation which has been punishing household incomes and eroding business gains may drop by the second half of the year but predicted that prices will quicken to 35.4 percent in December.
“The moderation in inflation is not going to be as low as we expected. We’re going to be seeing 25 or 27 percent by the end of the year with some luck.”
Rewane explained that since prices are still high, the monetary policymakers may not begin lowering borrowing costs, stating that with inflation cooling later in the year interest rates may begin to slow.
Consumer prices in Africa’s top oil producer climbed to a three decade high of 34.6 percent in November and in an effort to control fast rising prices, the central bank raised key interest rates to 27.5 percent.
In his outlook, founder and chief consultant at B.Adedipe Associates Limited, Biodun Adedipe however expects inflation to drop to 33 percent by the end of 2024 while naira averages 2025 at N1,574.4/$1.
“The naira will lose value but very moderately. We estimate the exchange rate at N1,574.4/$1. MPR to be moderated as inflation is expected to end 2024 at 33 percent and 27 percent in 2025,” the leading economist said.
The naira which closed 2024 losing about 41 percent of its value and for most of the year was accorded as one of the worst performing currencies by World Bank and Bloomberg has begun to strengthen.
The local currency appreciated by N125 to a dollar one month after the launch of the Electronic Foreign Exchange Matching System (EFEMS), according to a BusinessDay’s report with analysts saying the gains might be an indication that the naira’s rebound journey might just have begun.
Meanwhile, Ifeoluwa Dixon, head, fixed income solutions at FBNQUEST Asset Management said “we do not expect the hawkish stance of the monetary policy to trend downwards in the first half of the year. We see inflation and interest rate moderating at the later part of 2025, around mid-Q3.”
