The World Bank has recently recommended that the Central Bank of Nigeria (CBN) control its efforts to manage and reduce inflationary pressures in Nigeria.
This recommendation comes in the light of Nigeria’s inflation rate, which rose to 34.8 per cent in December from 33.6 per cent in November, indicating the need for sustained monetary policy measures.
The World Bank emphasized the importance of the CBN maintaining its focus on inflation control, suggesting actions like improving agricultural yields, enhancing connections between rural and urban areas, and considering adjustments in trade policy to support local production.
Sameer Matta, a senior economist specializing in Nigeria for the World Bank Group, delivered these remarks at the recent launch of the 2025 macroeconomic outlook hosted by the Nigerian Economic Summit Group (NESG).
In his presentation, Matta provided valuable analysis and projections that captured the economic landscape of Nigeria, setting the stage for discussions on the country’s future fiscal trajectory.
He stated: “I think what is critical in terms of inflation is to stay the course. I think that the central bank needs to continue to be focused on making sure that inflation is under control.
“Part of it is related to the supply side. What can be done to improve the yield on the agriculture side? What can be done to improve the link between rural and urban areas?
“There is the question of what can be done on the trade policy side. One would be to increase production locally, but that would take time.
“One of the things that can be done on the trade policy side is to think through which sectors could be targeted to allow some tariffs to be adjusted.”
He continued:“I would liken these reforms to someone with a hard medical condition who had to make tough choices.
“Let’s not forget that at some point in Nigeria, the debt service to revenue was 100 per cent; now, the good news is that we are around 50 per cent, and that is a big decline.
“The cost of reforms comes mainly from high inflation, and in the case of Nigeria specifically, food inflation is impacted by FX and the fact that lots of agricultural products are impacted by the price of petrol.
“That means the impact of these reforms is being felt by the most vulnerable.
“It is very important that the government continues on the reforms on social protection but also accelerates the roll-out of these cash transfers. It is more important to finance them over the future.
“It will be very important to continue to encourage the authorities to scale up and accelerate these interventions, which are time-bound and targeted at those who are impacted and done through a digital way to avoid any potential misuse in the future.”
Inflation in Nigeria has been a significant concern, with rates escalating to some of the highest in decades. As of the latest data, Nigeria’s inflation rate increased to 34.80 per cent in December from 34.60 per cent in November of 2024.
This rise in inflation has been attributed to several factors:
Food Prices: There’s been a notable increase in food prices, with food inflation rates soaring, contributing significantly to the overall inflation rate. This is partly due to supply chain disruptions, insecurity affecting agricultural production, and rising import costs due to currency depreciation.
Currency Depreciation: The floating of the naira has led to its significant depreciation, which increases the cost of imports, thereby pushing up inflation. The naira’s value has been volatile, affecting the cost of goods and services.
Fuel Prices: The removal of fuel subsidies has caused a sharp rise in petrol prices, which in turn affects transportation costs and the price of goods across the board.
Monetary Policy: The Central Bank of Nigeria (CBN) has been adjusting interest rates to try to curb inflation, but the effectiveness of these measures has been debated. Despite these efforts, inflation remains high, indicating that monetary policy alone might not address the structural issues causing inflation.
Structural Challenges: Nigeria’s inflation is also driven by structural issues like inadequate infrastructure, which leads to higher logistics costs, and inefficiencies in the agricultural sector, which impacts food supply.
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