Nigeria’s Inflation Rate Forecasted to Reach 30% by Year-End

Stears, a data-driven insights provider, has projected that Nigeria’s inflation rate may surge to 30 percent by December 2023. The firm unveiled its Pan-African inflation forecasts, indicating that Nigeria’s annual inflation is expected to steadily rise, reaching a level not seen since the country’s modern democratic era.

Stears’ forecasts are rooted in robust econometric tools that analyze numerous factors influencing inflation, encompassing both general and country-specific dynamics. According to Fadekemi Abiru, Head of Insights at Stears, “In September, we saw the exchange rate premium—the differential between official and parallel rates—rise to 25.2 percent, a significant increase from August.”

The firm anticipates this gap to continue widening, exerting additional inflationary pressures unless substantial dollar inflows bolster the economy. Factors like an extended rainy season, affecting harvests, also contribute to the rising inflation.

Stears emphasized that its forecasts are designed to assist corporations, professionals, and policymakers in making informed short-to-medium term pricing, investment, and policy decisions. These inflation forecasts span from October 2023 to December 2024, providing both average and year-end predictions for the years 2023 and 2024.

Nigeria currently grapples with one of the world’s highest inflation rates, which has pushed an estimated four million people into poverty between January and May 2023 due to soaring living costs. The World Bank notes that the removal of fuel subsidies and exchange rate devaluation and unification will continue to drive inflationary pressures, eroding the purchasing power of the average Nigerian in the short term.

The International Monetary Fund predicts that high inflation will decelerate Nigeria’s economic growth to 2.9 percent in 2023, as stated in its recent World Economic Outlook report. Nigeria’s inflation rate has already exceeded the World Bank’s projected rate of 25 percent for 2023, highlighting the critical challenges the country faces in stabilizing its economy and ensuring the well-being of its citizens.