Amid Middle East Crisis, Inflation To Hit 16% – Analysts

Analysts at Afrinvest West Africa have warned that Nigeria’s inflation trajectory may reverse its recent disinflation trend, with headline inflation projected to climb to about 16 per cent in the near term, driven by the ripple effects of the escalating Middle East crisis on energy and domestic prices.

This is as they stressed that without swift policy responses, rising energy costs could deepen cost-of-living pressures and erode recent gains in price stability.

This comes as the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics showed that headline inflation moderated marginally by four basis points year-on-year to 15.06 per cent in February 2026, marking the twelfth consecutive month of easing price pressures.

However, the analysts noted that the decline was weaker than expected, largely due to a resurgence in food inflation, which rose by 3.2 percentage points year-on-year to 12.1 per cent, offsetting gains in core inflation, which declined by 1.8 percentage points to 15.9 per cent.

On a month-on-month basis, inflationary pressures showed renewed volatility, with headline inflation rising by 2.0 per cent in February, a sharp reversal from the deflationary reading of negative 2.9 per cent recorded in January.

Food inflation surged to 4.7 per cent from negative 6.0 per cent, while core inflation increased moderately by 0.9 per cent from negative 1.7 per cent in the preceding month.

Afrinvest attributed the sharp swings in monthly inflation figures partly to the recent statistical smoothing exercise carried out by the NBS following the rebasing of the CPI series. The firm explained that the adjustment, which aligned inconsistencies in previously adopted base periods, is expected to stabilise inflation readings in the near term.

Despite this, analysts cautioned that underlying price pressures remain elevated, particularly from persistently high food costs and structural bottlenecks across the economy.

Looking ahead, Afrinvest highlighted that developments in the Middle East pose significant upside risks to inflation. According to the firm, crude oil prices have surged to about $105 per barrel from $72.69 at the end of February, triggering a sharp increase in domestic energy costs.

The report noted that the spike has already translated into higher retail prices of petroleum products, with petrol rising to about N1,350 per litre, diesel to N1,650 per litre, and cooking gas to N1,400 per kilogram in several states.

“These increases are expected to cascade across transportation, logistics, healthcare and food prices,” the analysts said, adding that existing structural challenges such as inadequate power supply, poor road infrastructure and insecurity could further amplify inflationary pressures.

In its baseline scenario, Afrinvest projected that the pass-through effect of the energy shock could drive headline inflation up by about 150 basis points to 16.6 per cent year-on-year, while month-on-month inflation could spike to 5.2 per cent.

The firm warned that a prolonged crisis could derail the Federal Government’s target of reducing average inflation to 16.5 per cent in 2026 from 23.3 per cent recorded in 2025.

To mitigate the impact on households, Afrinvest urged the government to implement targeted interventions, including the rollout of affordable mass transit systems, healthcare subsidies for low-income earners, and the temporary suspension of tariffs and related charges on food imports and other essential commodities.