2025: Inflation Rate to Decline as Naira Stabilizes in Narrow Band — Bismarck Rewane

Nigeria may witness a decline in inflation and a more stable exchange rate in the coming months, according to projections by Financial Derivatives Company (FDC), led by economist Bismarck Rewane.

Speaking at the recent Lagos Business School breakfast session, Rewane explained that recent data show the Central Bank of Nigeria (CBN) has significantly slowed money supply growth, which had peaked at 78% in May 2023. This development, he noted, sets the stage for reduced inflationary pressure and exchange rate stabilization.

FDC expects Nigeria’s inflation rate to ease slightly to 23.15%, based on forthcoming data from the National Bureau of Statistics (NBS). Meanwhile, the naira is projected to trade within a narrow and stable band of ₦1,600–₦1,650 per U.S. dollar in the near term.

Further easing is expected from the Central Bank, with FDC forecasting a 50 basis point (bp) cut in the Monetary Policy Rate (MPR) at the next meeting of the Monetary Policy Committee (MPC).

Rewane also forecast lower fuel costs, with the pump price of Premium Motor Spirit (PMS) potentially falling to ₦845 per litre, while diesel may hover around ₦950/litre.

Despite improved foreign reserves and a slowdown in money supply growth, Rewane maintained that the naira remains significantly undervalued — by 26.82% on average. At the time of his presentation, the official Nigerian Autonomous Foreign Exchange Market (NAFEM) rate was ₦1,599.33/$, which he compared to an estimated Purchasing Power Parity (PPP) rate of ₦1,158.50/$, reflecting a 27.08% disparity.

He also pointed to the relative weakness of the U.S. dollar globally, which has depreciated by 8.7% year-to-date, further reinforcing his argument for potential naira strengthening.

Rewane highlighted several sectors with emerging opportunities, including power, agriculture, healthcare, and logistics. He noted that over 50% of Nigeria’s power demand remains unmet, offering significant investment potential. Similarly, agricultural value chains—from storage to mechanization and food processing—present growth opportunities, especially amid ongoing food security challenges.

In the healthcare and pharmaceutical industries, rising demand and inadequate public infrastructure present a gap the private sector is poised to fill. E-commerce and logistics are also set to benefit from continued urbanization and changing consumer behavior.

Despite these prospects, Rewane acknowledged lingering challenges in the energy sector, including policy uncertainty, foreign exchange risks, and tariff shortfalls, which continue to deter significant investment.

As Nigeria navigates its economic reforms, experts like Rewane believe that a combination of policy consistency, market stability, and sector-specific investment could drive sustainable growth and improve macroeconomic conditions.