PwC Forecasts Inflation Decline to 26% and Stable Exchange Rate in 2025
In a significant economic projection for 2025, Olusegun Zacchaeus, Partner and Lead for Strategy & West Africa at PricewaterhouseCoopers (PwC), has forecasted that Nigeria’s inflation rate will decline to 26%, while the exchange rate is expected to remain stable.
Zacchaeus shared these insights at the PwC and BusinessDay Executive Roundtable on Nigeria’s 2025 Budget and Economic Outlook, themed “Insights and Strategies for Navigating Nigeria’s Economic, Fiscal and Policy Landscape in 2025.”
Key Projections for 2025
1️⃣ Inflation to Drop to 26%
• This decline will be driven by monetary policy tightening and improvements in Nigeria’s foreign exchange market.
• Inflation stood at 34.8% in December 2024, mainly due to rising costs in food, transportation, and utilities.
• The factors influencing inflation in 2025 will include monetary policies, supply-side dynamics, cyclical trends, and sector-specific inflation.
2️⃣ Stable Exchange Rate Expected
• The CBN’s Foreign Exchange (FX) reforms will help stabilize the naira.
• Despite an average depreciation of 39.8% in 2024, external reserves grew to $38.67 billion.
• Five key factors will determine FX stability:
• Price discovery
• Market transparency
• Liquidity levels
• Clearing of demand backlogs
• Investor confidence
3️⃣ GDP Growth Forecast at 3.3%
• Sustained policy reforms will support economic growth.
• However, high fiscal deficits and debt servicing costs could limit expansion.
4️⃣ CBN’s Monetary Tightening Stance to Continue
• The Central Bank of Nigeria (CBN) is expected to maintain high interest rates to ensure long-term price stability.
5️⃣ Fiscal Sustainability Remains a Concern ⚠️
• As of August 2024, the fiscal deficit was 7.6% of GDP, exceeding the approved limit of 3.8%.
• Debt servicing will remain a critical issue for the Nigerian government.
Implications for Businesses & Investors
• Businesses should prepare for a high-interest-rate environment and adapt strategies accordingly.
• Investors can expect a more stable forex market, improving confidence in Nigerian assets.
• Policymakers need to focus on structural reforms to sustain economic growth and inflation control.
Conclusion
While Nigeria’s inflation outlook for 2025 looks positive, challenges such as fiscal deficits, debt servicing, and currency risks remain key concerns. The CBN’s monetary stance and FX policies will play a crucial role in shaping economic stability in the coming year.
Would you like to discuss the impact of these projections on stock market investments? Let’s talk!
In a significant economic projection for 2025, Olusegun Zacchaeus, Partner and Lead for Strategy & West Africa at PricewaterhouseCoopers (PwC), has forecasted that Nigeria’s inflation rate will decline to 26%, while the exchange rate is expected to remain stable.
Zacchaeus shared these insights at the PwC and BusinessDay Executive Roundtable on Nigeria’s 2025 Budget and Economic Outlook, themed “Insights and Strategies for Navigating Nigeria’s Economic, Fiscal and Policy Landscape in 2025.”
Key Projections for 2025
1️⃣ Inflation to Drop to 26%
• This decline will be driven by monetary policy tightening and improvements in Nigeria’s foreign exchange market.
• Inflation stood at 34.8% in December 2024, mainly due to rising costs in food, transportation, and utilities.
• The factors influencing inflation in 2025 will include monetary policies, supply-side dynamics, cyclical trends, and sector-specific inflation.
2️⃣ Stable Exchange Rate Expected
• The CBN’s Foreign Exchange (FX) reforms will help stabilize the naira.
• Despite an average depreciation of 39.8% in 2024, external reserves grew to $38.67 billion.
• Five key factors will determine FX stability:
• Price discovery
• Market transparency
• Liquidity levels
• Clearing of demand backlogs
• Investor confidence
3️⃣ GDP Growth Forecast at 3.3%
• Sustained policy reforms will support economic growth.
• However, high fiscal deficits and debt servicing costs could limit expansion.
4️⃣ CBN’s Monetary Tightening Stance to Continue
• The Central Bank of Nigeria (CBN) is expected to maintain high interest rates to ensure long-term price stability.
5️⃣ Fiscal Sustainability Remains a Concern ⚠️
• As of August 2024, the fiscal deficit was 7.6% of GDP, exceeding the approved limit of 3.8%.
• Debt servicing will remain a critical issue for the Nigerian government.
Implications for Businesses & Investors
• Businesses should prepare for a high-interest-rate environment and adapt strategies accordingly.
• Investors can expect a more stable forex market, improving confidence in Nigerian assets.
• Policymakers need to focus on structural reforms to sustain economic growth and inflation control.
Conclusion
While Nigeria’s inflation outlook for 2025 looks positive, challenges such as fiscal deficits, debt servicing, and currency risks remain key concerns. The CBN’s monetary stance and FX policies will play a crucial role in shaping economic stability in the coming year.
Would you like to discuss the impact of these projections on stock market investments? Let’s talk!