The World Bank and the International Monetary Fund (IMF) have advised the Central Bank of Nigeria (CBN) to remain committed to its inflation control policies as the country grapples with rising prices.
Nigeria’s inflation rate surged to 34.8% in December 2024, up from 34.6% in November, according to data from the National Bureau of Statistics (NBS).
Calls for Stronger Policy Coordination
During a recent panel discussion, Sameer Matta, Senior Economist for Nigeria at the World Bank, stressed the need for sustained efforts to curb inflation.
“It is essential for the CBN to remain focused on stabilizing inflation,” Matta stated. He emphasized that improving agricultural productivity and strengthening rural-urban trade connections would help ease inflationary pressures.
Matta also called for a review of trade policies, recommending targeted tariff adjustments to support key sectors. He noted that failing to implement necessary reforms could be costly, with fuel and foreign exchange subsidies each consuming 2% of Nigeria’s Gross Domestic Product (GDP).
“This results in an overall impact of 5% of GDP, which is an unsustainable economic burden,” he added.
He likened these reforms to tough medical treatments, emphasizing the importance of social protection programs, including cash transfers, to shield vulnerable populations from the impact of economic adjustments.
IMF Advocates for Fiscal-Monetary Coordination
Also speaking at the event, Christian Ebeke, Nigeria’s IMF Country Representative, emphasized the need for stronger coordination between fiscal and monetary authorities to effectively control inflation.
Ebeke acknowledged efforts by the CBN and the Ministry of Finance to synchronize policies, which has helped moderate inflationary pressures. He also highlighted the social implications of reforms, particularly the removal of fuel subsidies and recent Naira policies, urging authorities to implement strategies that protect low-income groups.
He praised efforts to reduce deficit monetization and improve financial stability, noting that transparent debt management and securitization would help spread out repayment obligations and enhance investor confidence.
Nigeria’s Inflation Challenges
The latest inflation figures reflect the economic strain on households, with rising costs driven by increased consumer demand during the festive season.
- December 2024 inflation reached 34.8%, a 5.87% increase from December 2023’s 28.92%.
- Food inflation and foreign exchange volatility remain key contributors to rising prices.
Way Forward
As Nigeria battles inflation, experts stress the importance of coordinated monetary and fiscal policies. Key recommendations include:
- Enhancing agricultural output to stabilize food prices.
- Implementing targeted trade policies to control import costs.
- Expanding social safety nets to protect vulnerable citizens.
- Strengthening fiscal discipline to curb excessive government spending.
With global financial institutions urging caution, the CBN’s next steps will be crucial in determining Nigeria’s economic trajectory in 2025.
