The International Monetary Fund (IMF) has foreseen a decline in Nigeria’s inflation rate to 23 percent in 2024 and 15.5 percent in 2025.
Daniel Leigh, IMF’s Division Chief of Research Department, hinted on this at the Fund’s World Economic Outlook (WEO) update press conference, recently.
Nigeria’s inflation rate stood at 28.92 percent as of December 2023, 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.
He stated: “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.
“And the CBN 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.”
According to Leigh, while the monetary tightening to conquer inflation is ongoing, Nigeria should prioritise revenue mobilisation, and widen its tax base to provide social support.
“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.
“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,” Leigh added.
