Analysts Project Further Decline In Inflation Rate On Improved Food Supply

Nigeria’s inflation outlook is expected to improve in the coming months, buoyed by increased food supply from the ongoing harvest season and improved stability in the Nigerian foreign exchange market.
Coronation Merchant Bank, in its latest Inflation Outlook for August, projected that headline inflation will ease to 21.45 per cent year-on-year in August from 21.88 per cent recorded in July, while month-on-month inflation is expected to moderate slightly to 1.74 per cent.

Inflation has declined after a slight rise in March this year declining to 22.97 per cent in May, 22.22 per cent in June before printing 21.88 per cent in July. The National Bureau of Statistics (NBS) is expected to release the August inflation figures this week ahead of the Monetary Policy Committee Meeting on September 22-23, 2025.

The Coronation Merchant Bank report pointed out that early harvests of staple crops such as maize, groundnuts, pumpkins and vegetables, particularly in the southern and middle-belt regions, have helped to soften food prices. This development, according to Coronation, will contribute significantly to reducing pressures on the food basket which remains the major driver of inflation.

The outlook also highlighted the role of exchange rate stability in supporting disinflation. With the naira closing at about N1,531.57 to the dollar in August, reflecting a mild appreciation, the cost of imported food items is expected to ease. Stability in the foreign exchange market is moderating the cost of processed and packaged foods, providing further relief to consumers, Coronation stated.

Energy costs, which have weighed heavily on production and transportation, were also observed to have moderated in the period under review. This, coupled with stronger foreign exchange liquidity backed by rising external reserves, up by about $1.91 billion to $41.27 billion, has further strengthened the Central Bank’s ability to manage market pressures.

Coronation noted that steady portfolio inflows have reinforced market confidence, a factor expected to sustain the relative calm in the FX market.
However, the report cautioned that a few risks could slow down the pace of disinflation.

It drew attention to the brewing disagreement between Dangote Refinery and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) over unionisation of drivers, warning that any disruption in fuel supply could trigger higher transportation and production costs. Seasonal flooding, already beginning in parts of the country, was also identified as a threat to food supply and distribution channels.

The report maintained that the outlook for September is largely positive if current conditions persist. “If strong FX stability, rising reserves and abundant food from harvests continue, inflation for September is likely to remain broadly in line with August levels,” the bank noted, though it warned that the magnitude of the decline may be modest.