Five months into 2025, Nigeria is yet to achieve the 15 per cent inflation target the federal government set for itself.
Daily Trust reports that headline inflation is an aggregate of the movement of prices of goods and services in an economy between a certain period of time.
This helps to gauge the purchasing power of citizens as well as direct policy decisions of the government in terms of salary, interest rates and other economic indices.
In Nigeria, the inflation rate in 2024 was at a peak, hitting a 20 year high of 34.80 percent by December.
While this has put some goods beyond the reach of most Nigerians and pushed millions more into poverty, the federal government, in a bid to ease the skyrocketing costs of goods and services, made some economic calculations to reduce this burden with some policy instruments and the 2025 budget.
When the government made the announcement during the presentation of the 2025 budget last, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, had hinged the decision on improved national security that has led to increased output by farmers as well as a boost in oil production.
Also, in his New Year broadcast, President Bola Tinubu, assured Nigerians of a boost in food production and reduction in inflation on food and drugs to 15 per cent, while strengthening the economy in 2025.
President Tinubu while highlighting economic growth indicators, including lower fuel prices, rising foreign reserves and a stronger Naira, as signs of progress in 2024 that would continue into 2025, he e stated that economic indicators point to a positive and encouraging outlook for the country as “fuel prices have gradually decreased, and we recorded foreign trade surpluses in three consecutive quarters.”
“Foreign reserves have risen, and the Naira has strengthened against the US dollar, bringing greater stability.”
The President said Nigeria’s stock market’s record growth had generated trillions of naira in wealth, adding that the surge in foreign investment reflected renewed confidence in the country’s economy.
“In 2025, our government is committed to intensifying efforts to lower these costs by boosting food production and promoting local manufacturing of essential drugs and other medical supplies.
“We are resolute in our ambition to reduce inflation from its current high of 34.6 per cent to 15 per cent.
“With diligent work and God’s help, we will achieve this goal and provide relief to all our people,” said the President.
But economic experts and analysts described the government’s promise as an ambitious and aspirational goal and not realistic.
The experts however projected positive trends in terms of economic stability in the year 2025 but insisted the inflation would still remain above 20 per cent.
For instance, the Founder and Chief Consultant, B. Adedipe Associates (BAA), Dr. Biodun Adedipe during FirstBaFi’s Webinar on “Nigeria 2025: Pathway to Economic Rebound and Recovery” said inflation is not going in the direction of 15 per cent projected by the President, saying, “We project 33% by the end of 2024 and 27 per cent this year.”
He said food inflation has been the number one driver of headline inflation, saying for Nigeria to achieve “inclusive, sustained and sustainable” economic growth, it must address the issue of food deficit, energy deficit and manufacturing deficit.
Looking at the 2024 economic growth, he had projected that by the end of 2024, “we see an economy that may likely end at about 4.12 per cent growth rate for 2024.”
“Now if it grew at that rate, by any standard globally, that growth rate is significant. People often think 3% growth rate is small but by any standard globally, growing at 3.46, 3.47, 3.49, 4.12% is quite strong but the challenge for us is that growth has come mostly from services.
“For those who think the growth numbers are not that reliable are also reminded that it appears because that growth came mostly from services. That took us back to where I started from, which is deficit in food and manufacturing which of course are two major sectors that can drive inclusive and sustainable growth,” he added.
Adedipe further projected the moderation of exchange rate in 2025, stabilising at N1575 to one dollar, saying, “For us in Nigeria, the major drivers of the FX rate are the structure of the economy where we consume what we don’t produce and we produce what we don’t consume.”
He hailed the expanded capacity for local refining of crude oil, stating it would ease the pressure on the FX market.
He stated that addressing the problem of inflation requires more than raising the interest rate, adding there must be food availability and food affordability.
“For that to happen, Nigeria must address causes of food deficit, like security. 60% of farm output goes into post-harvest losses due to storage inadequacy and processing inadequacy,” he said.
Also, the Chief Executive Officer, Financial Derivatives, Bismark Rewane pointed out that the year 2025 would not be as hard as 2024.
He stated that the food import waiver which would have reduced inflation has been “bureaucratically bungled.”
“We have to be careful of false expectations. Theopresident’s goal of 15% is an aspiration and people are free to have aspirations but we deal in the world of reality. We are going to be seeing more like 27 or 25 % towards the end of the year with some luck.”
Rebasing wiped 10.32 percent from inflation book
To the surprise of many, Nigeria’s inflation nosedived to 24.48 per cent in the month of January 2025 from the 36.80 percent, taking off 10.32 percent basic points from the inflation official books but not in the real market.
This was achieved through the rebasing of the country’s inflation basket to accommodate new products that were not included when the last rebasing was done in 2009 as well as removal of some products no longer in vogue.
Speaking during the announcement of the new rebased inflation figure, the Statistician-General of the Federation, Adeyemi Adeniran, explained that the rebasing was necessary to ensure a more accurate reflection of inflationary pressures in the country.
Adeniran said the CPI rebasing involved shifting the base year from 2009 to 2024 to better capture changes in consumption patterns, pricing, and household expenditures.
He noted that Nigeria had not rebased its CPI in over a decade, even though the exercise is typically conducted every five years to reflect economic realities.
With the rebasing, the methodology for computing inflation has been refined, including the adoption of the Classification of Individual Consumption According to Purpose 2018 version, which improves the categorisation of household expenses.
The Statistician-General also highlighted the exclusion of own-production, imputed rents, and gifted items from the inflation calculations to ensure the CPI only measures actual monetary expenditures.
Inflation movement since rebasing
Since the rebasing, the inflation figures have fluctuated in the six months of data made available by the NBS.
According to the bureau the inflation moved from 24.48 per cent in January to 23.18% in February. There was a slight rise in March as the figure increased to 24.23 per cent but dropped to 23.71 per cent in April and 22.97 in May while it dropped to 22.22 in June, marking a three-month consecutive drop.
15% target not feasible – Economist
Emeritus Professor of Economics, Ndubusi Nwokoma insisted the 15 per cent target is not feasible.
“I don’t think it is something that can be attained despite the rebase. Without the rebasing, it (inflation) would have been more than 30 per cent.”
Also speaking, Ayokunle Olubunmi, a financial analyst said, “I doubt whether the 15 per cent is feasible. Remember, we are already approaching August and if you look at the average rate this year, if you are going to get to that 15, the figure should have dropped significantly, maybe we might get to that by the end of the year but I don’t think this is feasible.”
(Daily Trust)
