Key Points

• World Bank dismisses single-digit inflation target’s feasibility.

• Nigeria’s structural deficits and volatility remain constraints.

• Sienaert warns policy consistency is essential for inflation control.

The World Bank has said that Nigeria’s goal of having single-digit inflation is impossible to reach in the near future because of the country’s current fiscal problems, unstable exchange rates, and deep structural weaknesses.

According to a report by the Punch news, Alex Sienaert, the Bank’s Lead Economist for Nigeria, made the position clear when he launched the Nigeria Development Update in Abuja. He is in charge of the country’s macroeconomics, trade, and investment. Sienaert said that inflation will stay high even after recent economic changes unless the fiscal and monetary authorities work together more closely.

According to the National Bureau of Statistics, Nigeria’s headline inflation was about 33.2 percent in August 2024. This was mostly because food and energy prices were going up. Sienaert said that average inflation could stay around 22 percent in 2025, as long as there are no new shocks.

He agreed that the government’s reform measures, like getting rid of fuel subsidies and unifying foreign exchange, had made things clearer and less distorted. However, he warned that the benefits could be lost if spending grows faster than productivity.

People are now questioning the goal of single-digit inflation

Many government predictions still hope that inflation will drop below 10%. But the World Bank says that this kind of hope doesn’t match up with the country’s current economic fundamentals. Sienaert said that it is hard to keep prices stable because of the country’s high reliance on imports, low industrial output, and constant power shortages.

Food prices, which make up more than 60% of Nigeria’s inflation basket, are still very worrisome. Food prices keep going up because of rising logistics costs, unsafe farming areas, and poor transportation infrastructure.

Sarah Alade, who used to be the Deputy Governor of the Central Bank, also said that single-digit inflation might not be possible. She told a policy forum in Lagos, “We can’t honestly promise single digits when fiscal deficits, dependence on other countries, and supply bottlenecks are still there.”

The World Bank, on the other hand, praised Nigeria for lowering its budget deficit from 6.2% to about 4.4% of GDP, which shows that the country is slowly making progress in fiscal consolidation.

Policy consistency is now very important for credibility

The Bank warned that inconsistent policy changes or more borrowing to cover the deficit could make inflation worse. Sienaert said that keeping macroeconomic discipline could help bring inflation down to about 18 percent by 2026 if the conditions are right.

He called for better cooperation between the Central Bank of Nigeria, the Ministry of Finance, and state governments to increase revenue, cut waste, and make farming more productive.

Nigeria’s goal of reaching a single-digit inflation target is still far off, held back by both outside pressures and problems at home.