Inflation relief under threat as global energy shocks loom

Nigeria’s inflation rate recorded a marginal decline in February 2026, offering cautious optimism for policymakers and businesses. However, the Centre for the Promotion of Private Enterprise (CPPE) warned that emerging global energy shocks could quickly reverse these fragile gains.

​Muda Yusuf, CPPE chief executive officer, noted in the centre’s latest policy brief that headline inflation eased slightly to 15.06% year-on-year in February. This represents a decrease from 15.10% in January and is significantly lower than the 26.27% recorded during the same period last year.

​Persistent pressures despite year-on-year moderation

​Despite the marginal annual decline, inflationary pressures intensified on a monthly basis. Yusuf noted that National Bureau of Statistics (NBS) data showed month-on-month inflation rose to 2.01%, while food inflation surged to 4.69%. This spike reverses earlier moderation and underscores persistent cost pressures.

​The CPPE attributed the year-on-year easing to base effects, sustained monetary tightening, and relative macroeconomic stability. However, Yusuf cautioned that the improvement remains fragile and does not yet signal a decisive shift in Nigeria’s price dynamics.

​Energy and transport costs strain households

​According to the CPPE, the rising cost of food, transport and energy continues to erode purchasing power. This has left households, particularly in urban areas, under severe financial strain. Yusuf stressed that disinflation implies only a slower pace of price increases, not a reduction in the cost of living.

​Businesses, especially small and medium enterprises, are also grappling with a difficult operating environment. Elevated energy, logistics and raw material costs, combined with weak consumer demand, have tightened profit margins and increased vulnerability across key sectors.

​Geopolitical tensions threaten domestic stability

​The CPPE identified escalating geopolitical tensions in the Middle East involving Iran, Israel and the US as a major risk to Nigeria’s inflation outlook. The crisis has pushed global crude oil prices above $100 per barrel, raising concerns over supply disruptions and increased shipping risks.

​Yusuf warned that the transmission effects on Nigeria’s economy are profound. These include higher petrol and diesel prices, increased transportation costs, exchange rate pressures and rising food prices driven by more expensive inputs.

​Structural weaknesses amplify external shocks

​Nigeria’s structural weaknesses amplify the impact of such shocks. The country’s heavy reliance on petrol and diesel for power generation, due to unreliable electricity supply, creates a direct pass-through from global energy prices to domestic inflation.

​The CPPE estimated that unreliable electricity costs the Nigerian economy between N7-trillion and N10-trillion annually. Furthermore, spending on generators exceeds N3.7-trillion each year.

​Strategic policy actions required

​To mitigate these risks, Yusuf called for urgent and coordinated policy actions. He emphasised the need to strengthen domestic refining capacity by ensuring a stable crude oil supply to local refineries, including the Dangote refinery, under predictable terms.

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​He also urged governments to invest in efficient and affordable public transportation systems to ease the burden on households. Additionally, the CPPE advocated for the removal of fiscal barriers to renewable energy, including import duty waivers for solar equipment and the suspension of maritime charges.

​Long-term solutions for energy costs

​Improving electricity supply remains the most sustainable solution to the energy cost crisis. Yusuf noted that enhanced power generation and distribution would significantly reduce production costs and inflationary pressures over time.

​The CPPE advised monetary and fiscal authorities to remain cautious, warning that premature easing could undermine current gains. It also called for the prudent management of potential oil revenue windfalls, with a focus on strengthening foreign exchange reserves and supporting productive sectors.