Tag: Inflation

• CBN begins two-day meeting

The Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) will today begin a two-day meeting with strong possibility of reviewing its tightening policy stance and effect the first rate cut in two years.

On the back of sustained decline in inflation rate and continuing stability of the foreign exchange (forex) market, the 302nd meeting of the MPC is widely expected to signal a new momentum for inclusive national economic growth with modest reduction in the benchmark interest rate.

Since the last MPC meeting, global monetary easing has gained momentum, largely reflecting rising downside risks to growth and employment activities, while trade tensions have remained relatively subdued.

National Bureau of Statistics (NBS) latest Consumer Price Index (CPI) report showed that headline inflation rate dropped from 21.88 per cent in July to 20.12 per cent in August.

The naira has also rallied at both the official and parallel markets, Also, trading at an average rate of N1,530 per dollar  in the first half of the month. It peaked at N1,541 per dollar on September 1 before following an upward trend to reach its strongest level of N1,520 per dollar at present.

Managing Director, Financial Derivatives Company Limited, Bismark Rewane, said that with inflation easing for the fifth consecutive month to 20.12 per cent in August, the MPC is expected to cut the policy rate by 25 basis points (bps) to 27.25 per cent, which would slightly reduce the government’s debt service burden while keeping yields attractive enough to sustain Foreign Portfolio Investment inflows.

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Head of Research at Commercio Partners, Ifeanyi Ubah, explained that food inflation declined both on a year-on-year and month-on-month basis, supported by increased commodity supply as we are in the harvest season.

He said: “This easing in food inflation is a positive signal for the MPC, given that it has been a concern highlighted in previous meetings. The continued moderation in food prices is expected to give the MPC greater confidence to implement a rate cut”.

Other analysts at Cordros Securities, predicted that with recent developments, the MPC could begin a gradual transition toward monetary easing.

“However, any shift is likely to be cautious. We project a 50 basis points (bps) cut in the Monetary Policy Rate (MPR), signaling a measured effort to foster economic growth while maintaining its commitment to price and exchange rate stability,” they said.

The MPC may take a cue from the US Federal Reserve which for the first time this year, lowered the federal funds rate, after five consecutive sessions of holding rates steady, cutting the policy rate by 25bps to a range of 4 per cent to 4.25 per cent at its September meeting.

The decision reflects the Fed’s increasing focus on labour market weakness, as rising unemployment risks outweigh lingering inflationary pressures.

Elsewhere, the Bank of England cut its benchmark rate by 25bps to  four per cent in August, citing subdued growth and a weakening labour market, but held it steady in September amid concerns over upside risks to medium-term inflation.

Meanwhile, the European Central Bank maintained its key policy rates, including the deposit, main refinancing operations, and the marginal lending facilities, at two per cent, 2.15 per cent, and 2.40 per cent, respectively, at the September policy meeting, marking the second consecutive period after a cumulative 100bps decrease this year. The decision to keep rates steady was driven by the need to balance easing inflation with resilient economic conditions and external uncertainties.

The analysts said: “We expect the MPC to begin reassessing its current policy stance, supported by sustained improvements in key indicators (inflation and the exchange rate) and a more positive outlook. The Committee is also likely to consider recent shifts globally to monetary easing, following the US Fed’s rate cut and the prospect of further policy accommodation in near future periods. This should be positive for capital flows into emerging and frontier markets, including Nigeria, adding an additional layer of support to engender continued exchange rate stability”.

“That said, we expect the committee to remain cautious, balancing growth-supportive measures with its core mandate of maintaining price stability. Specifically, we believe any easing will be carefully calibrated in an effort to ensure that interest rates remain competitive enough to continue to attract capital inflows and anchor inflation expectations. Accordingly, we project a 50bps cut in the Monetary Policy Rate (MPR) to 27 per cent at next week’s meeting, while maintaining other parameters.,” they said.

Continuing, Rewane said the August inflation drop marks the fifth consecutive monthly decline since April 2025.  The moderation in inflation is supported by relative exchange rate stability and the harvest season, signaling improved supply dynamics with policy efforts to stabilise the economy.

“However, high inflationary pressures still persist in certain regions such as Borno and Kano, where food prices remain elevated, signaling uneven regional impacts. While headline inflation showed improvement, core inflation remained elevated at 20.3 per cent, indicating ongoing price pressures in housing, utilities, transport, and other essential services.”

 For consumers and small businesses, the easing inflation trend implies a gradual relief from the high cost of living and operating expenses,” he said.

Also, the naira continues to appreciate in September, trading at an average rate of N1,530/$ in the first half of the month. It peaked at N1,541/$ on September 1 before following an upward trend to reach its strongest level of N1,520/$ on September 8.

This appreciation is driven by a 26 per cent year-on-year increase in foreign exchange inflows and the Central Bank of Nigeria’s contractionary monetary policy aimed at curbing inflation.

He said: “As inflation gradually eases, investor’s confidence improves, strengthening the naira by enhancing purchasing power and easing pressure on the exchange rate. With December approaching, heightened economic activity and festive spending are expected to inject more dollar liquidity into the economy. It’s also worth noting, that the main crop cocoa is underway till January; this typically leads to higher export earnings, providing additional support for the naira’s positive momentum”.

• Urges CBN to loosen grip on rates

Nigeria could end the year with its lowest inflation in nearly a decade, according to the Independent Media and Policy Initiative (IMPI), which has projected headline inflation to drop to 17 per cent by December 2025.

In its latest policy statement signed by Chairman Dr. Omoniyi Akinsiju, the think tank noted that the economy is experiencing one of its rare periods of disinflation, marked by five consecutive months of inflation decline.

The group, however, insists the Central Bank of Nigeria (CBN) must match this rare economic momentum by easing its restrictive monetary stance.

It urged the CBN’s Monetary Policy Committee (MPC) to begin easing the benchmark interest rate to consolidate gains.

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“Empirically speaking, the Nigerian economy is now in a disinflationary dispensation. Nigeria recorded a rare disinflation in 2025, with inflation falling from 24.5 per cent in January to 20.12 per cent in August, the sharpest mid-year slowdown in over a decade”, IMPI said.

According to the group, three key factors have shaped the current inflation deceleration: the Central Bank’s decision to hold rates at 27.50 per cent, which curbed credit demand and speculative forex activities; relative stability in the foreign exchange market due to higher inflows from oil, remittances, and non-oil exports; and improved food supply following better harvests and calm in food-producing regions.

With inflation already below the Central Bank’s 21 per cent target for the year, IMPI said the momentum could push the figure down to 17 per cent by December, close to the Federal Government’s 15 per cent goal.

“Attaining this target has huge microeconomic implications,” it stressed, projecting that the MPC may cut the Monetary Policy Rate by at least 50 basis points at its next meeting and by as much as 200 basis points before year-end.

It also recommended lowering the Cash Reserve Ratio from 50 per cent to 35 per cent by December, saying this would ease the cost of credit, spur business expansion, and support job creation.

Beyond monetary policy, IMPI highlighted the recovery of Nigerian firms after steep losses triggered by the Federal Government’s 2023 decision to float the naira.

Following a sharp depreciation that saw the currency fall from N460/$ in mid-2023 to N1,535/$ by the end of 2024, several consumer goods companies—including BUA Foods, Cadbury, Nigerian Breweries, and Nestlé Nigeria—reported combined losses of over N418 billion in Q1 2024.

The think tank said the return of relative exchange rate stability, coupled with cost restructuring, has since reversed the trend.

“By Q1 2025, the same companies posted a combined pre-tax profit of N289.8 billion, and by Q2 2025, they had returned to a combined profit of N264 billion,” it noted.

IMPI argued that the sharp turnaround underscored how policy stability and market adjustments can restore investor confidence.

“This captures the context in which domestic and global commentators have returned a verdict of stability for the Nigerian economy,” the statement concluded.

Nigeria’s inflation rate has continued to ease, falling to 22.22 per cent in June from 22.97 per cent in May 2025. This represents a 0.75 per cent decline. Compared to June 2024, when inflation stood at 34.19 per cent, the new figure marks a significant 11.97 per cent drop and a pullback from last year’s inflation spiral. The inflation rate drop was largely driven by the rebasing and positive outcome of key reforms instituted by the Central Bank of Nigeria (CBN), which triggered continued FX stability, spike in foreign reserves to $40.11 billion on July 18, reports Assistant Editor, COLLINS NWEZE

In recent months, there has been significant improvement in macroeconomic indicators as seen in the moderation in inflation rate and growth in foreign reserves.

These macroeconomic advantages include the progressive narrowing of the gap between the official and parallel market rates as well as positive balance of payments.

The FX reforms, instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN), new policies instituted by the Federal Government to boost local production, reduce forex demand pressure, and lessen domestic prices have been instrumental to macroeconomic stability.

The expectations are that the apex bank sustains the forex reforms while the fiscal authority strengthens efforts at enhancing FX earnings, especially from gas, oil and non-oil exports.

Analysts said such moves will be sustaining inflation drop as seen in the last report released by the National Bureau of Statistics (NBS) which revealed that the annual headline inflation eased by 0.75 per cent to 22.22 per cent in June from 22.97 per cent in May. The drop was largely driven by base effects, continued FX stability, and minimal volatility in energy prices.

Domestic economy / capital inflows 

The domestic economy shows that economic activity remained on a firm upward trajectory in Q2-25, supported by easing inflationary pressures and naira stability, both of which have strengthened business confidence and production.

The CBN composite Purchasing Managers Index (PMI) averaged 52.2 points in Q2-25 indicating broad-based expansion across the agriculture, industry, and services sectors.

In emailed report to investors, analysts from Cordros Securities said: “ We expect inflation to remain on a downward trend, especially as the naira is projected to remain stable. Additionally, we expect petroleum product prices to remain stable, supported by low global oil prices, which should help maintain steady transportation costs”.

They explained that capital inflows have equally rebounded since global financial pressures eased in May. The elevated naira yields and a stable FX market continued to attract foreign portfolio investments and bolster investor confidence.

Specifically, inflows from foreign investors surged by 315 per cent to $2.73 billion in June, the highest since March 2019, from $657.4 million in April, with Foreign Portfolio Investment (FPI) inflows accounting for 97.2 per cent of total foreign inflows. The rebound in inflows led to a decline in CBN interventions in forex market as demand pressures waned.

On the other hand, Nigeria’s external reserve has risen to $40.11 billion as of July 18, 2025, making it the highest level recorded since November 2024 when it hit $40.11 billion.

The $40.11 billion reserve level representing approximately 9.5 months of import cover, signals a significant boost to country’s foreign currency buffer.

This was disclosed by Cardoso during the  301st Monetary Policy Committee’s (MPC) meeting in Abuja. He explained that the rise in foreign reserve marked a significant rebound in Nigeria’s foreign currency buffers amid ongoing efforts to stabilize the exchange rate and rebuild investor confidence. The reserves spike happened despite relatively stronger CBN market intervention this year and external debt servicing as well as weak oil receipts.

Looking ahead, the analysts expect robust FX liquidity from both foreign and local sources, driven by strong market confidence, to continue supporting naira stability in the near term.

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Looking ahead, analysts expect headline inflation to ease further in July, supported by a moderation in both food and core inflation components.

“Specifically, we anticipate the slowdown in food prices to be supported by improved market supply from early green harvests and the relative stability of the naira, which is expected to reduce pressure on imported food prices. Similarly, core inflation is projected to remain broadly stable, supported by a reduced exchange rate pass-through effect and steady energy prices,” they said.

 Multiple FX sources activated

The CBN under Cardoso is cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain. The move has led to substantial accretion to the gross FX reserves and supported the stability of the naira.

Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under Cardoso puts in a lot of efforts in attracting more inflows into the economy. Diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

The remittances in the economy is expected to increase based on  CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.

Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms.

Oil production rise aids disinflation

In emailed report, Managing Director, Afrinvest West Africa, Ike Chioke, said crude oil production data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), captured the OPEC Monthly Oil Market Report (MOMR), and the Consumer Price Index (CPI) data by the National Bureau of Statistics (NBS).

“Starting with the crude oil production related subject, both the NUPRC data and OPEC’s monthly oil report affirmed that Nigeria’s daily average crude oil production improved by 3.6 per cent month-on-month in June 2025 to 1.5 million barrels per day (mbpd).”

“By adding condensate, total output cleared at 1.7mbpd, marking a 2.4% increase in average crude oil and condensate production over the previous month. The June crude oil production performance marked the second highest monthly average in 2025, with January’s 1.54mbpd performance (1.74mbpd including condensate) still the strongest,” he said.

According to him, output rebound from major terminals – Forcados (up 9.5 per cent m/m to 8.8mbpd), Odudu (up nine per cent m/m 20 2.1mbpd), Qua Iboe (up 2.3 per cent to 5.1mbpd), and Bonny (up one per cent to 7.2mbpd) – more than offset losses from Brass (down 15 per cent m/m to 0.9mbpd), Escravos (down 8.7 per cent m/m to 4.2mbpd), and Tulja-Okwuiboime (down 4.5 per cent m/m to 2.1mbpd) terminals.

“Contextualising the economic impact of the modest improvement in the crude oil production level for the month (excluding condensate as there is no formal pricing guide), we estimate that Nigeria earned a daily average revenue of $105.0m in June from its crude oil production (given average price of $69.73/bbl), representing a 13.6 per cent improvement over May. Relative to the prior five months, our estimate suggests that the daily average revenue for June is the third highest after January ($122.3m at average price of $79.46/bbl) and February ($112.5m at average price of $76.81/bbl),” he said.

Bringing all of this together, we maintain our position in the recently published H2:2025 outlook report that Consumer Price Index rebasing impact on the base year would largely support a sustained decline in the headline inflation rate till the end of Q3’2025, thereby causing a divergence between statistical reading and consumers’ experience on the street.

“Against this backdrop, our model projects the headline rate to ease to 21.6 per cent in July, though m/m reading is expected to increase to 1.75 per cent as against 1.68 per cent in June,” Chioke stated.

As naira rallies, import costs to dip

Import costs have been tipped to drop significantly as the naira continues to gain more ground across markets.

The naira appreciated significantly last week, strengthening from N1,580 to N1,530 per dollar, a gain of about 3.25 per cent at the parallel markets. The local currency exchanged at N1,536 per dollar at the official markets, creating N6 per dollar rate gaps between both markets.

Importation costs in Nigeria include various taxes and charges, primarily import duties, VAT, and other levies. These costs are calculated based on the CIF value (Cost, Insurance, and Freight) of the goods, which includes the cost of the goods, insurance, and shipping.

The cost, insurance and freight (CIF) price is the price of a good delivered at the frontier of the importing country, or the price of a service delivered to a resident, before the payment of any import duties or other taxes on imports or trade and transport margins within the country.

Changes in exchange rate can significantly impact the cost of imports, as duties and other charges are often calculated based on the prevailing exchange rate.

Nigeria’s total Imports in 2024 were valued at $40.97 billion, according to the United Nations COMTRADE database on international trade. Nigeria’s main import partners were: China, Belgium and India

New figures from the National Bureau of Statistics (NBS) reveal that Nigerian imported food and beverages worth N1.67 trillion ($1 billion) during the first quarter of 2025 (January–March), reflecting a five per cent increase from the N1.59 trillion recorded over the same period in 2024.

Analysts from Cordros Securities said the naira appreciation helped cushion the impact of the spike in imported fuel prices triggered by tensions in the Middle East.

“We expect FX liquidity to remain robust, supported by reduced global pressures and stronger market confidence, which continues to attract inflows from foreign portfolio investors (FPIs). Additionally, a stronger net FX reserve position enhances the CBN’s capacity to intervene when necessary. Barring any unexpected shocks, we anticipate that the naira will remain stable in the near term,” they said.

While Nigeria is making strides toward fuel self-sufficiency, it still relies on imports, as seen in the reduced import bill for the first quarter. This indicates a decline in fuel imports but not a complete elimination.

Already, trade tensions have softened from the tariff hike announcements in April. The US President paused the implementation of reciprocal tariffs, allowing countries to negotiate lower tariffs for 90 days, which was recently extended to August 1.

• Forex, petrol reduction cut costs

Inflationary pressure has reduced further as improved macroeconomic stability and gains in the foreign exchange and petroleum sector continue to support reduction in average costs of goods and services.

Economic intelligence reports by many economic and finance firms surveyed yesterday by The Nation indicated that headline inflation dropped for the third consecutive month in June 2025.

Ahead of tomorrow’s official release of the Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS), analysts were unanimous that stability in the foreign exchange (forex) market, reduction in price of premium motor spirit, popularly known as petrol and other monetary and fiscal policies sustained disinflationary trend.

Independent consumer surveys and econometric models indicated that headline inflation dropped by some 60 basis points to around average of 22.30 per cent for June 2025, from 22.97 per cent in May 2025, its third consecutive decline.

Headline inflation rate had improved by 52 basis points to 23.71 per cent in April 2025 on the back of reduced food inflation. Composite inflation had for the first time after the January 2025 rebasing, risen by 105 basis points to 24.23 per cent in March 2025 as against 23.18 per cent recorded in February 2025.

The NBS had in January updated the weight and price reference periods in calculation of the CPI to make the inflationary gauge more reflective of changes in consumption patterns and the economy generally. The rebasing not only brought the base year closer to the current period, from 2009 to 2024, it also introduced some critical methodology changes to improve the computation processes.

After the rebasing, inflation dropped from 34.80 per cent in the pre-rebased period of December 2024 to 24.48 per cent in January 2025.

Bismarck Rewane’s Financial Derivatives Company (FDC) said inflation is expected to ease to 22.65 per cent in June, from 22.97 per cent.

FDC attributed the reduction to a combination of factors, including a N100 reduction in PMS price, relative stability in the naira exchange rate, and a decline in money supply growth.

FDC however expected food inflation to rise by 0.42 per cent to 21.56 per cent from 21.14 per cent. Core inflation is projected to decline by 1.34 per cent to 20.94 per cent from 22.28 per cent.

“The inflation numbers could have been worse if not for the relative stability of the exchange rate,” FDC noted.

FDC noted that further cut in ex-depot price by Dangote Refinery could further exert downward pressure on pump prices and potentially ease inflation.

Afrinvest West Africa said inflation could drop as low as 22.2 per cent in June 2025.

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“Our view for the inflation projection is hinged on two major drivers. Firstly, the effect of the CBN’s strategic policy reforms has seen the naira strengthen in the month of June, up 3.6 per cent to close at N1,529.71. Secondly, the high base year effect from last year’s 34.2 per cent inflation reading is a contributing factor,” Afrinvest stated.

Senior Market Analyst, FXTM, Lukman Otunuga said the June CPI data is expected to show signs of cooling inflationary pressures.

He said continuing disinflation could offer some relief to the CBN which aggressively hiked interest rates throughout 2024.

Otunuga projected that inflation could drop to 21.4 per cent in June 2025.

He said the decline was aided by the recent gains in the naira amid higher non-oil exports and a weaker dollar.

Cordros Capital also projected that consumer price inflation would ease further in June.

“The recent stability of the naira should help moderate imported food prices, partly offsetting the upward pressure on overall food inflation which stems from the ongoing planting season and resultant shortage of farm output. Meanwhile, core inflation is likely to continue its downward trend, supported by stable energy prices and limited exchange rate pass-through,” Cordros Capital stated.

Analysts at CardinalStone said they expected inflation to moderate further in June, citing “continued stability in core components and supported by a stable forex and transport backdrop”.

Analysts said Dangote Refinery’s planned rollout of PMS and AGO distribution—targeting large-scale users  such as marketers, petrol dealers, manufacturers, telecom firms and aviation with free logistics—and its investment in 4,000 CNG-powered tankers should ease energy distribution bottlenecks.

“This development could exert further downward pressure on energy prices, reinforcing the disinflationary trend,” CardinalStone stated.

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun and the Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso had met recently as part of efforts to deepen fiscal and monetary policy coordination and consolidate the gains of the macroeconomic reforms.

The meeting between the two leading members of the economic management team focused on strategies to consolidate the continuing improvements in prices.

The meeting also addressed ways to ensure that macroeconomic gains are not only sustained but translated into tangible benefits for the broader economy.

According to the statement issued after the meeting, the meeting reviewed ongoing policy reforms and examined how closer coordination between fiscal and monetary levers can help stabilise prices, restore investor confidence, and unlock new pathways for private-sector-driven growth.

The Lagos Chamber of Commerce and Industry (LCCI) however called for an urgent need for the government to scale up support for dry season farming, irrigation infrastructure, and mechanization to reduce Nigeria’s dependence on rain-fed agriculture.

LCCI stated that the government must remain focused on dealing with the challenges around food movement from the farms to the cities. Address inefficiencies in transporting goods particularly food from rural to urban markets can help lower market prices and reduce post-harvest losses.

“While the easing inflation rate is a welcome development, Nigeria must not lose momentum in addressing the structural drivers of inflation. The Lagos Chamber of Commerce and Industry urges the government to act decisively in tackling insecurity, investing in resilient agricultural infrastructure, and improving policy coordination to ensure the current progress becomes sustainable and inclusive,” LCCI stated.