Nigeria's Inflation to Remain High at 17.2% in 2025, Outpacing Other African Economies

Nigeria's inflation is predicted to remain stubbornly high at 17.2% in 2025, according to a Reuters poll of 15 analysts. The country's inflation woes are expected to persist due to factors such as sporadic flooding, instability of the naira currency, and an acute shortage of dollars.

This contrasts with the outlook for other key African economies like Kenya and Ghana, which are projected to see slower inflation rates in the coming years.

The poll indicates that Nigeria's inflation will quicken to 29.1% this year before slowing to 17.2% in 2025. The elevated inflation is largely driven by high food prices, which account for around 50% of the Consumer Price Index (CPI) basket in Nigeria. "Food price inflation remains elevated and is only marginally impacted by monetary policy," noted one of the analysts surveyed.

In an effort to curb inflation, the Central Bank of Nigeria has raised interest rates, with the monetary policy rate currently at 24.75%. However, analysts expect inflation to fall slowly this year despite these measures. The naira's instability and dollar shortages continue to exert upward pressure on prices.

Why this matters: Nigeria's persistently high inflation has significant implications for the country's economic stability and the well-being of its citizens. The rising cost of living, particularly for essential items like food, puts a strain on households and businesses. The divergence between Nigeria's inflation outlook and that of other African economies highlights the unique challenges the country faces in managing its currency and attracting foreign investment.

While Nigeria grapples with high inflation, the poll suggests a more favorable outlook for other African countries. Kenya's inflation is expected to slow to 5.6% in 2025, while Ghana's is projected to reach 12.1% in the same year. The report also indicates that Angola and Zambia are likely to see lower inflation rates in the coming years.

The Reuters poll underscores the impact of reliance on single commodity currency inflows, such as crude oil and copper, on inflation in these African countries. "Inflation in Nigeria is expected to fall slowly this year, despite the central bank raising interest rates," said one of the analysts polled. As Nigeria works to address its economic challenges, the country's ability to stabilize the naira, attract foreign investment, and diversify its economy will be crucial in bringing inflation under control and promoting sustainable growth.

Key Takeaways

• Nigeria's inflation to remain high at 17.2% in 2025, driven by factors like flooding, naira instability.
• Nigeria's inflation to quicken to 29.1% in 2024 before slowing to 17.2% in 2025.
• High food prices account for around 50% of Nigeria's inflation, with monetary policy having limited impact.
• Other African economies like Kenya and Ghana projected to see slower inflation in coming years.
• Nigeria's ability to stabilize naira, attract investment, and diversify economy crucial to control inflation.