The International Monetary Fund (IMF) has predicted a decline in Nigeria’s inflation rate to 23 percent in 2024 and 15.5 percent in 2025.
Daniel Leigh, IMF division chief of research department, disclosed this at the fund’s World Economic Outlook (WEO) update press conference on Tuesday.
Nigeria’s inflation rate as of December 2023 stood at 28.92 percent, and has been on the rise for 11 consecutive months.
Reacting to the foreign exchange reforms introduced by the Central Bank of Nigeria (CBN) to curb inflation and the free fall of the naira, Leigh said the monetary tightening stance of the apex bank would help reduce inflation rate.
Leigh said one of the drivers of inflation is the weak naira following reforms by the financial regulator.
“Now there’s also structural factors behind that high inflation, including, you know, on the fiscal side, financing of the deficit. But this is clearly creating hardship. The perspective that we have is bringing down inflation is top priority,” he said.
“And Central Bank of Nigeria has already raised interest rates significantly over the past year to 18.8 percent. So that is the monetary tightening that is helping in our forecast to bring inflation down from 24.6 percent in 2023 percent, to 23 percent this year, and then closer to single digits into 2025 at 15.5 percent.”
He said while the monetary tightening to conquer inflation is ongoing, Nigeria should prioritise revenue mobilisation, and widen its tax base to provide social support.
“But on top of conquering inflation through monetary tightening, there’s also a need to provide social support through the budget and creating the space for that is the challenge,” Leigh said.
“Our perspective is that more revenue mobilisation, strengthening revenue administration, widening the tax base, this is what is going to bring in space for development spending while safeguarding fiscal sustainability.”
Meanwhile Olayemi Cardoso, governor of the CBN, recently said the naira is currently undervalued.
He said combined with coordinated measures on the fiscal side, the apex bank will accelerate genuine price discovery in the near term.
Cardoso also said CBN has reverted to the conventional monetary policy approach with a focus on achieving price stability, which fosters sustainable economic growth.
According to Cardoso, the apex bank aims to rein in inflation to 21.4 percent in 2024.
IMF in its economic outlook for January 2024 had downgraded its forecast for Nigeria to 3 percent — down from 3.1 percent projected in October 2023.