The International Monetary Fund (IMF) has projected a decline in Nigeria’s inflation rate to 26.3% in 2024, alongside an anticipated economic growth of 3.3% for the same year.
Released as part of its revised Global Economic Outlook for 2024, the IMF’s report highlighted Nigeria’s improving growth prospects while leaving Sub-Sahara Africa’s growth outlook unchanged, balancing a downward forecast in Angola with an upgrade in Nigeria’s projections.
The IMF’s report indicates that Nigeria’s economy is expected to grow by 3.0% in 2025, a slight decrease from the Fund’s previous projection in January 2024. Despite this, the Sub-Saharan Africa region is forecasted to experience growth, rising from an estimated 3.4% in 2023 to 3.8% in 2024 and further to 4.0% in 2025, attributed to the gradual subsiding of earlier weather shocks and improving supply issues.
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“In sub-Saharan Africa, growth is projected to rise from an estimated 3.4 percent in 2023 to 3.8 percent in 2024 and 4.0 percent in 2025, as the negative effects of earlier weather shocks subside, and supply issues gradually improve,” the report stated.
Globally, the IMF predicts stable growth at 3.2% for both 2024 and 2025, maintaining the same rate as seen in 2023. The report indicates a slight increase in growth for advanced economies, projected to rise from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025. Emerging markets and developing economies are expected to experience a slight deceleration in growth, decreasing from 4.3% in 2023 to 4.2% in both 2024 and 2025.
The IMF’s projection aligns with analysts’ expectations of a downward trend in Nigeria’s inflation, despite the consistent increase witnessed since the beginning of the year. Starting at 29.90% in January and reaching 33.2% by March, inflation has been a significant concern.
The World Bank’s Africa Pulse publication also forecasts Nigeria’s inflation to be lower, projecting it at 24.8% in 2024 and settling at 15.1% in 2026, in line with the IMF’s growth rate projection of 3.3%.
The report attributes the improved economic prospects for Nigeria to several factors, including a slight uptick in global economic growth, stable growth projections for advanced economies, and a relatively favorable outlook for emerging markets and developing economies.
Keeping hope of economic recovery alive
One of the most notable implications of a decline in inflation is the potential boost to the spending power of Nigerians. With prices rising at a slower rate, consumers are expected to experience an increase in their purchasing power. This, in turn, is also expected to stimulate consumer spending, a critical driver of economic activity, and contribute to overall economic growth.
Furthermore, a decrease in inflation is likely to provide relief to households and individuals grappling with the high cost of living. As the erosion of the value of money slows down, Nigerians are expected to find it easier to afford essential goods and services, thereby alleviating financial strain and improving their quality of life.
Moreover, lower inflation rates often lead to a reduction in interest rates by central banks. This policy intervention aims to encourage borrowing and investment, further stimulating economic activity. Businesses may also benefit from increased confidence and stability, potentially leading to higher levels of investment, job creation, and overall economic expansion.
While the IMF’s forecast bodes well for Nigeria’s economic prospects, it is important to note that challenges persist. Experts have warned that the government will need to continue implementing sound economic policies and reforms to sustain the momentum of recovery and address underlying structural issues.
However, economists agree that the IMF’s projection of a decline in Nigeria’s inflation rate offers a glimmer of hope amidst economic uncertainty. They said if realized, this forecast could contribute to a more favorable economic environment, characterized by increased purchasing power, reduced cost of living, and enhanced economic stability.