Disinflation Momentum Builds as Head

• Gives MPC Thicket For a Tweak

The week ended September 19, 2025, attention in Nigeria turned to the disinflation trend that saw headline inflation ease to 20.12% in August 2025, largely reflecting favourable base effects and moderated price pressures across key food and non-food categories. The moderation marks a continuation of the gradual slowdown witnessed in recent months, with support also coming from improved FX liquidity and relative currency stability.

The latest Consumer Price Index (CPI) report from the National Bureau of Statistics (NBS) revealed another moderation in Nigeria’s headline inflation, which eased to 20.12% year-on-year in August 2025 from 21.88% in July 2025.

This outcome was broadly consistent and outperformed our forecast of 20.83% and it under- scores the persistence of the disinflationary trend that has now extended into its fifth consecutive month.

The August print also represents the lowest annual inflation rate since April 2023, reflecting he cumulative impact of a relatively stable exchange rate regime, softening energy costs, and favourable base effects following the CPI rebasing exercise. Building on the encouraging downtrend inflation, month-on-month inflation slowed to 0.74% in August from 1.99% in July, underscoring the volatility in short-term price dynamics.

The moderation was largely offset by renewed pressures within the food basket, which remains the dominant driver of headline inflation. On a year-on-year basis, both food and core indices eased, reinforcing the broader disinflationary trend.

Nonetheless, structural rigidi- ties persist across supply chains, transportation, and housing, keeping underlying price pressures elevated. Sub-components such as restaurants and accommodation services (2.60%), transportation (2.15%), and housing-related expenses (1.69%) were notable contributors in August, indicating that services inflation remains sticky even as headline pressures continue to ease.

The food index slowed to 21.87% year-on-year in August, compared with 22.74% in July, confirming its central role in the overall disinflationary momentum. On a monthly basis, food inflation rose by 0.30%, while price increases in restaurants/ accommodation (+0.10%) and transport (+0.08%) reinforced the modest rise in the headline reading.

The July slowdown in monthly food inflation (to 1.65% from 3.12% in June) was partly due to falling prices of key staples such as imported and local rice, maize flour, sorghum, millet, semolina, and soya milk. Nonetheless, the persistent exposure of food prices to logistical bottlenecks, climate-related disruptions, and security challenges within agricultural corridors continues to impose a structural floor beneath inflation.