By Adedapo Adesanya
Nigeria’s inflation will moderate to 25 per cent by the end of the year, a new Fitch Ratings outlook for Nigeria shows.
In its latest Country Risk report on Nigeria, the global firm said the country’s rising inflation, which hit 34.19 per cent in June, has already peaked.
The report said food prices in Nigeria will stay high due to weak domestic production, caused by insecurity in agricultural regions and adverse weather conditions.
“Inflation has peaked, but weak food production to keep prices elevated,” Fitch noted, warning that these factors will continue to strain household finances, worsen poverty, and suppress private consumption in the quarters ahead.
“We project inflation will moderate to just under 25.0 per cent by year-end, but food prices will stay elevated due to weak domestic production, caused by insecurity in agricultural regions and adverse weather conditions.
“This will continue to strain household finances, worsen poverty, and suppress private consumption in the quarters ahead,” Fitch added.
The global firm also projected that the Nigerian economy will expand by a muted 3.0 per cent in 2024, up slightly from 2.9 per cent in 2023, but will hit 3.5 per cent in 2025.
However, it stated that the current high inflation, tighter monetary policy, and weak foreign direct investment will weigh on domestic demand, although an increase in domestic refining will support net exports.
“In 2025, we project that real Gross Domestic Product (GDP) will grow by 3.5 per cent as inflation moderates; however, structural constraints will keep growth below potential.
“We forecast that the Nigerian economy will expand by a muted 3.0 per cent in 2024, up slightly from 2.9 per cent in 2023,” the report noted.
According to Fitch, fixed investment will grow by 7.0 per cent but add just 1.0 percentage points to headline growth in 2024 as it continues to remain muted, despite improving market sentiment.
“Meanwhile, we believe that fixed investment will provide only limited support to the Nigerian economy. While the reforms enacted by the Tinubu administration are positively influencing market sentiment, concerns about Nigeria’s long-term business environment remain.
“Notwithstanding a 219.7 per cent y-o-y increase in capital inflows in Q1 2024, foreign direct investment remains subdued, pointing to a continued reluctance by foreign companies to invest in tangible assets, particularly outside of the hydrocarbons sector.”
Fitch also said it believed that the operational start of the Dangote refinery would boost net exports in 2024.
Modupe Gbadeyanka