Rent, Healthcare Pressure Persists As Food Inflation Slows

As food inflation eases, analysts have cautioned that pressures persist as rising costs in rent, healthcare and other essential services threaten to keep headline inflation elevated in early 2026.

Data released by the National Bureau of Statistics showed that headline inflation declined to 15.15 per cent year on year in December 2025 from 17.33 per cent in November, marking the lowest annual reading in over two years under the revised CPI framework.

On a month-on-month basis, prices rose by just 0.54 per cent, reflecting a slower pace of price increases and improved supply conditions toward the end of the year.

Analysts at Cowry Assets Management said the moderation in inflation reflects easing cost pressures, favourable base effects and better supply dynamics, particularly in the food segment.

According to the firm, food inflation fell sharply to 10.84 per cent year on year in December from 39.84 per cent in the corresponding period of 2024, while month-on-month food prices declined by 0.36 per cent.

The decline was driven by lower prices of key staples such as tomatoes, garri, eggs, vegetables, beans and grains, supported by seasonal harvest inflows and improved market supply.

This development is significant in an economy where food accounts for the largest share of household spending and has historically been the main driver of inflationary pressures.

However, despite the easing trend, Cowry noted that structural challenges persist, as the 12-month average food inflation remained elevated at 22.00 per cent, indicating that underlying vulnerabilities in food supply chains have not been fully resolved.

Core inflation, which excludes volatile agricultural and energy prices, also moderated in December. Year on year, it declined to 18.63 per cent from 29.28 per cent in December 2024, while month-on-month growth slowed to 0.58 per cent. Analysts said this points to softer short-term cost pressures across non-food items, even as longer-term risks remain.

While welcoming the improved food inflation dynamics, analysts at Afrinvest West Africa warned that pressure is building in other segments of the economy, particularly services. The firm expects mild upward price pressure in early 2026 from annual adjustments in housing and rent, healthcare, education, and other consumer-facing services.

Energy prices are also emerging as a renewed source of inflationary risk. Afrinvest noted that energy prices rose by 2.7 per cent month on month in December, compared with 1.1 per cent in November, while imported food prices increased by 2.8 per cent over the same period.

This divergence suggests that although domestic food supply conditions are improving, Nigeria remains exposed to external price shocks and energy cost pressures.

State-level data showed uneven inflation dynamics across the country, with year-on-year headline inflation highest in Abia, Ogun, and Katsina, while Sokoto, Plateau, and Kaduna recorded the lowest rates. On a month on month basis, some states experienced price declines, reflecting localised supply improvements, while others recorded sharp increases, underscoring persistent regional disparities.

Food inflation followed a similar pattern, with some states benefiting from falling prices due to improved harvests, while others saw increases driven by logistics constraints and local supply challenges.

Looking ahead, the analysts say they expect Nigeria’s inflation to continue to moderate, supported by favourable foreign exchange dynamics, easing food prices and improved supply conditions, albeit with risks.

Afrinvest analysts note that even in the absence of strong monthly price increases, headline inflation could rise again in early 2026 due to base effects, potentially printing above 18 per cent year on year. With monthly inflation expected around 0.7 per cent, the firm forecasts annual inflation of about 19.3 per cent in January 2026.

Cowry Assets analysts similarly cautioned that while underlying inflationary pressures are softening, structural risks remain, particularly in energy and essential services. The firm expects regional variations in price movements to persist, driven by differences in supply conditions and seasonal factors.