ARM: Nigeria inflation deceleration to begin in H1'25

In a recent market update, analysts at ARM Securities have projected that Nigeria's inflation rate for the first half of 2025 is poised to begin decelerating. Despite this optimistic outlook, concerns remain regarding food inflation, which currently hovers around 30%. Oyinkansola Aregbesola, an Investment Research Analyst at ARM Securities, shared insights on the firm's outlook for the year ahead. Aregbesola outlined three potential scenarios for inflation in 2025: the base case, the bull case, and the bear case. In the base case scenario, with a stable exchange rate, improved food supply, and minimal oil price fluctuations, inflation is expected to close at around 27.26%. However, the pessimistic bear case scenario could see inflation rise to nearly 37% if the exchange rate surpasses 1,900 levels. On the flip side, an optimistic outlook with an exchange rate of 1,200 could drive inflation down to 23%. The discussion then shifted to the uncertainty surrounding the exchange rate, with Aregbesola emphasizing that the Central Bank of Nigeria's (CBN) robust external reserves of $40 billion could pave the way for interventions to stabilize the Naira. Furthermore, anticipated advancements in the oil and gas sector, including the ramping up of production at Dangote Refinery, are expected to alleviate pressure on the Naira. A strategic approach to portfolio positioning was also highlighted as critical in navigating the market dynamics of 2025. Aregbesola identified the banking, oil and gas, and industrial goods sectors as promising areas for investment, urging investors to remain agile and responsive to market developments throughout the year.