Falling Inflation as Sign of Better Days Ahead

Ummie Kabir

At the advent of the current administration in Nigeria in 2023, inflation rate was at 22.41 percent. However, with the pronouncements of President Bola Tinubu during his inauguration ceremony that “subsidy is gone” and the subsequent floating of the naira exchange rates, inflation skyrocketed to 28.92 percent by December 2023.

Of course, food and transport accounted for the higher proportion in the basket. Inflation rate started galloping and the resultant hardship amongst citizens with poverty rate hitherto estimated to be around 46 percent, affecting approximately 104 million people in 2023, sadly jumped to an estimated 139 million in 2025, according to a World Bank report.

Though the report also acknowledged that some level of stabilisation has been achieved through recent government reforms, they are yet to significantly translate to improved household conditions, partly due to eroded purchasing power from high inflation and other economic shocks.

Even at that, oil which is the country’s major revenue source is recording an output hovering around 1.6 million barrels per day as against the 2.06 million barrels per day projected at an average price $65 below the 2025 budget benchmark of $75. That meant that both in terms of output and prices, Nigeria was off the income marks.

The rate of inflation became very alarming until the idea of rebasing the gross domestic product (GDP) computation was implemented in mid-2025 which calmed palpable fear of economic Armageddon, though with the underlining factors still steering at us, unresolved.

In reality, we all know what the figures were, before rebasing which is simply an economic process where a country’s economic data, like Gross Domestic Product (GDP), is updated to reflect current situation.

This is with a view to providing more accurate picture of the economy by incorporating new sectors and updated consumption patterns, making it easier to assess things like investment potential, employment statistics, debt-to-GDP ratios, and real growth.

The latest inflation figure from the National Bureau of Statistics (NBS) about Consumer Price Index (CPI) revealed that inflation moderated for the second consecutive month, falling sharply from 18.02 percent in September to 16.05 percent in October 2025, the lowest in 44 months. This moderation was driven by a new CPI base year and some easing in food prices. Whilst the headline inflation has slowed, Nigerians are still struggling to pay more for food, transport, energy, housing and other essential services in the midst of progressive growth records.

The silver lining is that Institutions like the International Monetary Fund (IMF), Moody’s and Standard and Poor (S&P), have been applauding the performance of the ongoing reforms and the corresponding growth trajectory in the last two years.

The IMF has raised Nigeria’s economic growth forecast for 2025 to 3.9 percent due to factors like improved oil production, investor confidence. The Fund also projects 4.2 percent growth for 2026, citing factors like the nation’s strengthened fiscal stance and improved security in the oil sector and further advised the government to prioritize rebuilding fiscal buffers, preserving central bank independence, and addressing structural impediments.

Moody’s, a rating agency, has also upgraded Nigeria’s rating from Caa1 to B3 based on a stronger fiscal position, improved external accounts, and the government’s commitment to reforms like liberalising the foreign exchange market and elimination of fuel subsidies

While Standard and Poor (S&P) another rating agency, posited that “the positive outlook reflects improving external, economic, fiscal, and monetary results. Despite low GDP per capita, a weak, albeit improving, fiscal revenue base, high debt servicing costs as a percentage of revenues, and challenges in compiling national statistics.”

S&P further noted that “authorities are taking steps to improve the economy’s growth prospects, and macroeconomic resilience.”

However, the agency was quick to add that it could revise the outlook to stable if risks to Nigeria’s reform program implementation rise or if capacity to repay commercial obligations weakens.

According to S&P, such could arise, for instance, from higher fiscal deficits or debt-servicing needs, or because domestic financial markets are unwilling to absorb additional local currency debt. Confidence-sensitive capital outflows could also pose downside risks.”

The country is over burdened with debt servicing obligations which no doubt, drains resources needed for meaningful development. While the debt-to-GDP ratio is projected to fall to 39.8 percent in 2025, Theo total public debt stock has significantly increased all through the year.

According to a forecast by BudgIT, total public debt could reach N187.79 trillion by the end of 2025.

The budget for debt servicing is more than the budget of education, health and defence put together in the 2025 budget. Nigeria’s debt service to revenue ratio (DS/RR) has been a serious concern, but hopefully, the ongoing economic reforms could possibly offer some relief if well implemented.

Much as rebasing has now provided a platform for proper evaluation of inflationary trends, the moderation may not reflect on critical growth factors like investment, credit to real sector, agricultural output and overall wellbeing of the citizens.

The 2025 World Bank report indicates that in addition to income poverty, many Nigerians also lack access to basic services, with significant percentages lacking access to improved drinking water, sanitation, and electricity.

The issue of affordability of basic amenities is very important as the poverty index remains high and alarming. In the report titled ‘Quality of Life Index by Country 2025 Mid-Year’ conducted by Numbeo, the survey which examined the overall human well-being factors ranging from safety, healthcare, cost of living, climate to security, and other relevant conditions ranked Nigeria as number one country with lowest quality life in the world.

By the way, Numbeo is the world’s largest cost of living database and a crowdsourced global resource for quality of life data. It provides insights into cost of living, housing price indicators, perceived crime rates, healthcare quality, transport quality, and various other key statistics.

If an estimated 139 million Nigerians live in poverty, representing approximately 61% of the population, a significant increase from previous years partly due to factors like falling consumption, high food inflation, and the impact of recent economic reforms that have, despite their positive effects on investor confidence, exacerbated inflation and reduced purchasing power for many. The situation is dire in rural areas where the poverty rate is about 75%, compared to roughly 40% in urban areas.

The central Bank of Nigeria (CBN) is living up-to expectations by deploying all the tools at its disposal to wrestle inflation down. It is not yet economic uhuru and it shouldn’t rest on our oars as much need to be done towards bringing inflation down to the desired level of single digit of 7.0 to 8.0 percent and more still need to be done.

The Central Bank of Nigeria (CBN) is already shifting to an inflation targeting framework to manage the country’s price stability. This move involves setting a specific, public inflation target (a numerical goal) and using monetary policy tools like interest rates to achieve it in collaboration with the Ministry of Finance on a strategy to achieve single-digit inflation.

In tackling the inflationary tendencies, it now behoves on the fiscal authority to mobilize other key players to face the challenge thrown at the country by IMF to grow the economy to a projected 4.2 percent and even beyond. This is achievable if the security situation improves, especially along the food production belts of the country. This will go a long way to stabilise prices, especially if the issue storage and preservation are revisited with all seriousness. This will not only ensure availability, stabilize prices and income for farmers amidst all year round availability and overall improvement in quality of life.

These optimistic projections are quite encouraging but far from laying the foundation for economic prosperity. Going forward in as much as the food component of the consumer price index (CPI) is moderating, we should not loose the hindsight that seasonality of major food crops and importation account for the relief. Deliberate efforts devoid of lip service, should be made to boost agricultural productivity by ensuring security of life property across the country.

Given the structural deficiencies like a infrastructural gap, insecurity, weak governance both at corporate and government at all levels and inability to harness available resources to diversify revenue base to insulate the economy from market volatility, portends serious setbacks towards reining in inflation. The resources to needed to fix these huge gaps might not be readily available, however, government should prioritize and tackle security and power and agriculture headlong.

Of Major concern is availability of finance for the agricultural sector. Banks are risk adverse when it comes agriculture in particular, however, the novel anchor borrowers programme along with other lofty agricultural initiatives of the Central Bank of Nigeria should be revisited, reformed, and re-implemented in well-coordinated manner by the Agriculture Ministry and related agencies both at the federal and sub-national levels. Basic tasks of the agencies should include making appropriate inputs fertilizer and seedlings available to farmers at right time, provide irrigation facilities, revive the Strategic grains reserve initiative, guaranteeing appropriate prices for farmers and resuscitate the agricultural extension workers programme to reposition the sector greater productivity.