By Ada Samson, Abuja
Nigeria’s inflation dynamics are showing signs of gradual moderation, with analysts projecting a potential decline to 17.0-17.9% year-on-year by November 2025.
This optimistic forecast, presented by Stanbic IBTC analysts on Thursday, hinges on two key factors: favorable base effects from 2024’s high inflation readings and relative macroeconomic stability.
The projection suggests inflation could remain below 20% by October, marking a significant milestone in Nigeria’s battle against persistent price pressures that have plagued the economy for years.
The path to 17% inflation won’t be linear. Short-term pressures are expected to persist through July and August, traditionally difficult months marked by peak flooding in southern Nigeria and the lean agricultural season in the north.
These seasonal patterns typically drive food scarcity and higher prices, with forecasts suggesting July’s year-on-year inflation could range between 21.71-21.88%, easing slightly to 21.28-21.63% in August. Core inflation, which excludes volatile food and energy prices, is expected to remain relatively stable at 1.1-1.3% month-on-month, supported by contained energy costs and naira stability.
A significant wildcard emerges in December 2025 due to technical factors surrounding Nigeria’s CPI rebasing. The rebased CPI showed December 2024 inflation at 15.44% year-on-year, compared to 34.80% under the old series. This creates a distorted base effect that could artificially spike December 2025 inflation to around 34% year-on-year if monthly inflation holds at -0.4%. However, if the National Bureau of Statistics uses the pre-rebased 34.8% figure for comparison, year-end inflation could settle at a more moderate 22-23%.
The Central Bank of Nigeria faces delicate policy decisions amid this outlook. The Monetary Policy Committee is expected to maintain rates at its July meeting, with potential easing only materializing in September if inflation trends confirm sustained moderation.
Analysts anticipate cumulative rate cuts of 150-200 basis points in late 2025, following 2024’s aggressive 875 basis point hike. The MPC may first signal its dovish shift by narrowing the asymmetric corridor around the MPR from its current +500/-100 basis points configuration.
Recent inflation data provides cautious optimism, with June 2025 figures showing a second consecutive monthly decline to 22.22% year-on-year from 22.97% in May. However, underlying pressures remain evident as month-on-month inflation actually accelerated to 1.68% in June from 1.53% in May. Food inflation continues to drive overall price increases, with monthly food inflation jumping to 3.25% in June from 2.19% in May, particularly affecting staples like meat, tomatoes, and plantain flour.
Geographical disparities complicate the inflation picture, with urban areas (22.72% y/y) experiencing stronger price pressures than rural areas (20.85% y/y). State-level variations are even more pronounced – Borno recorded 31.63% inflation while Zamfara saw just 9.90%. Similar extremes appear in food inflation, ranging from 47.40% in Borno to 6.21% in Katsina.
The projected decline to 17% by November would represent significant progress, but risks remain substantial. Food supply chains remain vulnerable to weather shocks and security challenges, while potential adjustments to fuel subsidies or electricity tariffs could reignite price pressures. Global commodity price movements and exchange rate stability will also play crucial roles in determining whether Nigeria can achieve and sustain this disinflation trajectory.
For policymakers, the challenge lies in maintaining monetary discipline while addressing structural constraints in agriculture, transportation, and energy that perpetuate inflationary pressures.
While base effects may deliver improved headline numbers, lasting price stability will require solutions beyond monetary policy alone. The coming months will test whether Nigeria’s economy has truly turned a corner or if the projected November improvement represents merely temporary relief in a longer inflationary cycle.
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