Why Nigeria’s headline inflation declined to 20.12% in August

Nigeria’s headline inflation decelerated markedly in August 2025, standing at 20.12% y/y (–175bps from 21.88% in July), marking the fifth consecutive month of disinflation and underscoring a sustained moderation in price pressures. On a month-on-month basis,
headline inflation slowed to 0.74% (–125bps from 1.99% in July), reversing the previous two months of acceleration. The moderation was largely driven by a sharp pullback in food inflation, which offset an uptick in core inflation. Seasonal harvest has
increased food supply which has also helped to reduce food price growth.

Nigeria’s Core Inflation

Core inflation eased to 20.33% y/y (–100bps from 21.33% in July). However, on a m/m basis, core inflation rose to 1.43% (+47bps
from 0.97%, the lowest in 2025), driven by price increases in transport (2.60% vs. 0.37%), health (4.21% vs. 1.80%), services (0.66%
vs. 0.48%), clothing and footwear (2.10% vs. 0.80%), restaurants and accommodation (2.66% vs. 1.90%), and personal
care/miscellaneous services (3.15% vs. 2.15%). These pressures were partly offset by price declines across housing (-3.90% vs. –
1.15%), information and communication (1.58% vs. 1.99%), insurance and financial services (0.38% vs. 1.26%), and education (-
2.73% vs. 0.37%).

Nigeria’s Food Inflation

Food inflation declined to 21.87% y/y (–87bps from 22.74% in July), while the m/m print moderated to 1.65% (–125bps from 3.12%
in July). The slowdown reflects broad-based price reduction across key staples such as imported and local rice, guinea corn flour,
maize flour, millet, semolina, and soya milk. Additionally, imported food inflation eased to 1.28% m/m (vs. 1.55% in July), supported
by reduced import costs following the naira’s marginal appreciation of 0.13% m/m to ₦1,531.57/US$1 in August (closing at
₦1,497.47/US$1 yesterday, 15 September 2025).

Regional Inflation Dynamics

At the sub-national level, Ekiti (28.17%), Kano (27.27%), and Oyo (26.58%) posted the highest headline inflation rates in August,
reflecting stronger localized price pressures. Conversely, Zamfara (11.82%), Anambra (14.16%), and Enugu (14.20%) recorded the
lowest inflation, indicating relatively contained price growth. On a m/m basis, inflation accelerated the most in Yobe (9.20%),
Katsina (8.59%), and Sokoto (6.57%), while Enugu (-5.32%), Taraba (-3.64%), and Nasarawa (-3.56%) saw the steepest declines.
Policy Outlook: MPC to Retain Restrictive Stance Near-Term

We expect the Monetary Policy Committee (MPC) to maintain its current cautious and restrictive policy stance at their upcoming
meeting. We expect that they will want to ensure that the disinflation on the m/m basis seen in August is consolidated and not
just a one off before they start easing as the Governor has previously warned of the dangers of easing too early which may allow
inflation to rebound, negating the hard work and pain put in to combat high inflation over the last couple of years. The MPC may
also have an eye on maintaining the attractiveness of fixed income instruments for FPIs which has helped stabilize the FX market
and played an important role in reducing inflation. Given current dynamics, we anticipate that the MPC could consider a mildrate cut towards the end of the year (November meeting), contingent on further disinflation and stability in the FX market.