Nigeria’s inflation to drop to 21.5% by 2024 — Report 

Nigeria’s inflation is projected to drop to 21.5 percent in 2024, from the 24.5 percent recorded in 2023. This is according to the 2024 Macroeconomic Outlook produced by the Nigerian Economic Summit Group (NESG).

According to the report, launched on January 24, 2024, the decline in inflationary pressures is anticipated to result from reduced reliance on Ways & Mean financing for the budget deficit, a stable structural exchange rate, and additional proactive monetary measures implemented by the Central Bank.

The report also noted that food inflation is poised to persist as a primary contributor to overall inflation, propelled by increased credit costs, security concerns, and internal displacement issues.

The report noted, “The removal of fuel subsidies will continue to increase core inflation, primarily through high transport and energy costs.”

NESG also made projections about the different possible inflation behaviours in 2024. The report noted that in the occasion of “stagnation,” the rate could hit 25.1 percent. Stagnation implies a situation where there is a prolonged period of economic slowdown, low or no growth, high unemployment, and overall economic inertia.

In the case of “obsolescence,” inflation could hit 28.5 percent. Obsolescence implies a situation where existing economic structures, policies, or practices have become obsolete, leading to potential challenges or disruptions in the economy.

And in the case of a “comprehensive overhaul,” inflation could hit 21.5 percent.

The report notes that risk factors for inflation in Nigeria in 2024 include:

Continued climate-induced disruptions, such as flooding, coupled with widespread insecurity, may lead to a decrease in crop production and an upward pressure on food prices.

The persistent weakness of the Naira due to the illiquidity of the Forex market.

It was recommended that setting a cap on petrol pump prices has the potential to mitigate the extent of the pass-through impact resulting from the removal of fuel subsidies on both food and non-food item prices.

In 2023, Nigeria recorded an inflation of 24.5%, which was 5.7 percentage points higher than the 18.8 percent posted in 2022. Despite the CBN’s hawkish stance on the monetary policy rate, with the MPR fixed at 18.75 percent, and the Cash Reserve Ratio being 32.5 percent, inflationary pressures did not cool off.

According to the NESG’s 2024 Macroeconomic Outlook, inflationary pressure primarily stemmed from limitations in productivity rather than monetary factors, which has posed challenges for the CBN’s monetary interventions to control inflation.

As the CBN’s Monetary Policy Committee is set to meet on February 26 and 27, it is anticipated that the CBN will stick to its hawkish stance on the monetary rates.