…Headline inflation is expected to continue easing going forward, supported by the stability of the exchange rate and even an appreciation of the naira.
TUE SEPT 16 2025-theGBJournal| In August, headline inflation eased further for the fifth consecutive month, falling to 20.12%from 21.88% in July 2025, a decline of 176 basis point.
Food and core inflation also declined year on year. Food inflation fell to 21.87% in August 2025 from 22.74% in July 2025, a decline of 87 basis point. Core inflation eased to 20.33% in August 2025 from 21.33% in July2025, a decline of 100 basis point.
Headline inflation is expected to continue easing going forward, supported by the stability of the exchange rate and even an appreciation of the naira.
This stability will strengthen investor confidence, particularly as the anticipated rate cut in the US could trigger a shift of funds into emerging markets.
With Nigeria’s environment becoming more stable, the naira trading at a competitive level, and the high-interest-rate environment, investors are likely to remain attracted to the Nigerian market.
In addition, the unification of the exchange rate has reduced opportunities for arbitrage and eased pressure on the naira, with more funds now flowing through the official market.
Food inflation is expected to decline further going forward as we move deeper into the harvest season. Existing food stocks are being sold off to make room for newly harvested produce, while the harvest itself is increasing the overall supply of food in the market.
A potential headwind to this outlook could be a rise in transportation costs, given the need to move food across regions. However, we expect transportation costs to remain stable, limiting the risk of upward pressure on prices.
This is expected to bring relief to overall inflation, as the drop in food prices, which carry significant weight in the CPI basket, will help reduce headline inflation in the economy.
Core inflation is also expected to ease in September, reflecting the broader stability in the economy. With exchange rate appreciation of the Naira, food prices moderating, and overall demand remaining relatively contained, the underlying components of inflation are likely to show softer movements.
Ahead of the MPC: Key Expectations
The MPC’s 302nd Meeting is scheduled for the 22nd and 23rd of September 2025. We anticipate the Committee will implement a 25-basis-point rate cut for the first time this year, in a bid to stimulate economic activity and strengthen domestic demand.
This projection is supported by declining inflation and continued exchange rate stability. In the first half of September, the naira recorded a notable appreciation in value, while food inflation, one of the MPC’s key concerns, eased in August 2025.
Given Nigeria’s current high-interest rate environment, a rate cut has become increasingly important to encourage investment and support business activity across the economy.
Oil prices, one of Nigeria’s major sources of foreign inflow, are expected to remain stable in the near term.
Brent crude traded within the $65 to $68 range in August 2025, and we do not anticipate any short-term shocks that could drive a significant deviation from this band. Such stability is expected to sustain steady foreign inflows into Nigeria and provide support to the external reserves position.
Bottom Line
The August inflation data points to continued easing price pressures, with inflation falling year on year and Month on month, except core inflation, which rose by 0.46% month on month.
This slight uptick in core reflects price stickiness in non-volatile items such as housing, utilities, and transport, which tend to be more permanent in nature. Nonetheless, the broader disinflationary trend, supported by stable exchange rates and the onset of the harvest season, signals improving stability in the economy.
With food and headline inflation continuing to moderate, the MPC is likely to view this as sufficient room to begin cautious easing. Overall, the outlook remains positive, with short-term pressures outweighed by sustained gains in price stability.-This economic note is proved by Comercio Partners Research.
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