Nigeria’s inflation seen pausing at 15.9% in June

Cooking a modest pot of soup for a family of four has become a luxury in Nigeria. A meal prepared with one kilogram of kote fish (horse mackerel) and N1,000 worth of pomo, enough to last two days if eaten once daily, now costs about N12,000. Four years ago, that same amount could buy 10 kilograms of kote fish, which sold for about N11,000, according to Modern Agriculture Farm, leaving about N1,000, enough at the time to buy a 50-cube pack of Knorr Chicken seasoning. Alternatively, N12,000 could also buy a 25-kilogram bag of rice in Lagos.

That is what inflation now means. It is no longer just an economic statistic but the widening gap between what Nigerians earn and what everyday essentials cost. If BusinessDay’s June inflation estimate is confirmed, prices may have stopped accelerating. They have not become affordable.

BusinessDay’s Inflation Nowcast estimates headline inflation at 15.9 percent in June, with a likely range of 15.7 to 16.1 percent, ahead of the National Bureau of Statistics’ official release on July 15. If confirmed, the figure would be marginally below May’s 15.93 percent, ending three consecutive months of rising inflation. But the significance lies less in the small decline than in what it suggests about Nigeria’s inflation cycle.

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After falling steadily for eleven consecutive months, inflation reversed course in March and continued climbing through May, prompting concerns that the country’s disinflation trend had stalled. June’s estimate suggests those renewed price pressures may have eased, but not enough to indicate a return to sustained disinflation.

BusinessDay’s Nowcast combines the previous month’s inflation, monthly movements in the official exchange rate, business activity measured by the Stanbic IBTC/S&P Global Purchasing Managers’ Index (PMI), and a structural adjustment for the National Bureau of Statistics’ 2025 inflation rebasing exercise. An autoregressive component captures inflation’s tendency to persist over time, providing a real-time estimate before official data are released.

The more important question is what the June reading says about the nature of Nigeria’s inflation problem.

Over the past two years, inflation was driven largely by macroeconomic shocks, particularly exchange-rate depreciation following foreign exchange reforms and the removal of fuel subsidies. Those shocks are gradually fading. What remains are more persistent structural pressures: insecurity disrupting agricultural production, expensive transport logistics, unreliable electricity, high energy costs and supply chain inefficiencies.

That distinction matters because monetary policy is better suited to addressing demand-driven inflation than structural supply constraints.

The Central Bank of Nigeria has already delivered one of the most aggressive tightening cycles in the country’s history, raising the Monetary Policy Rate from 11.5 percent in early 2022 to 27.5 percent before trimming it to 26.5 percent this year. The June estimate suggests the tightening has largely achieved its primary objective of preventing another inflation surge. Whether it can drive inflation materially lower is becoming a different question altogether.

That leaves policymakers facing a more complicated challenge at the Monetary Policy Committee meeting scheduled for July 20 and 21.

At its previous meeting in May, the MPC held the policy rate at 26.5 percent, arguing that the renewed inflation pickup between March and May largely reflected temporary external factors, particularly higher global oil prices linked to geopolitical tensions in the Middle East. Olayemi Cardoso, Governor of CBN, described those pressures as transitory rather than structural.

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A June reading around 15.9 percent neither validates nor disproves that assessment. Inflation has not accelerated sufficiently to justify another rate increase. Equally, it has not resumed a convincing downward trend that would support further monetary easing. The most likely outcome therefore remains another hold, with markets paying closer attention to the committee’s guidance on whether September could present an opportunity for the next rate cut.

For investors, this is largely good news. Inflation appears to be stabilising while interest rates remain high. Since the Central Bank’s policy rate is 26.5 percent and estimated inflation according to BusinessDay is around 15.9 percent, investors who buy Nigerian government securities can still earn returns that stay ahead of inflation. That makes Nigeria one of the more attractive destinations for investors looking for high yields. As long as inflation does not start rising sharply again, many investors are likely to keep their money in Nigerian Treasury bills and bonds.

The situation looks different for businesses and households. Commercial lending rates remain prohibitively high, reflecting not only the elevated policy rate but also structural factors such as the Cash Reserve Ratio. Even if the Central Bank begins easing later this year, borrowing costs are likely to remain restrictive for some time.

Meanwhile, households receive little immediate relief from a pause in inflation. A stable inflation rate does not mean prices are falling. It simply means they are rising less quickly than before. Food, transport, rent and energy costs remain significantly higher than a year ago, while wage growth continues to lag behind increases in the cost of living.

That explains why inflation may be slowing statistically without improving lived economic conditions. Ultimately, June’s estimate suggests Nigeria’s inflation battle has entered a new phase.

The country appears to have moved beyond the acute shocks caused by currency liberalisation and fuel price adjustments. The remaining inflation is increasingly structural, rooted in agricultural productivity, logistics, electricity supply, transport infrastructure and security.

Those are challenges that interest rates alone cannot solve. If the June estimate is confirmed, the policy debate should begin shifting away from how much higher or lower interest rates should go and towards the structural reforms needed to improve food production, lower logistics costs and raise productivity.

Monetary policy may have done much of the heavy lifting. The next phase of disinflation will depend less on the Central Bank and more on the broader economy’s ability to produce, move and distribute goods more efficiently. That is a considerably harder task.