Fitch Solutions has projected that Nigeria’s high inflation, which reached 34.19% in June, has peaked and will decrease to below 25% by the end of 2024.
However, food prices are expected to remain high due to weak domestic production influenced by insecurity and adverse weather, further straining household finances and suppressing private consumption.
Fitch forecasts Nigeria’s economy will grow by 3.0% in 2024, slightly up from 2.9% in 2023, and reach 3.5% in 2025. Despite improvements in market sentiment due to recent reforms by President Bola Tinubu, including the removal of petrol subsidies and exchange rate liberalization, high inflation and weak foreign direct investment will continue to weigh on domestic demand.
The report highlights that fixed investment will grow by 7.0% in 2024, but will contribute only 1.0 percentage point to overall growth due to structural challenges. Meanwhile, the Dangote refinery is expected to boost net exports, reducing Nigeria’s dependence on imported refined products. Fitch projects that net exports will add 3.1% to headline economic growth in 2024, with real GDP growth accelerating to 3.5% in 2025 as consumer activity recovers and inflation moderates.
Despite these positive projections, Fitch warns that structural constraints, such as a high cash reserve ratio, elevated interest rates, and widespread insecurity, will continue to limit Nigeria’s economic growth potential and foreign direct investment inflows.
(This Day)