Nigeria’s Inflation Declines for Fifth Month, Falls to 20.12% in August

The average cost of goods and services in Nigeria continued to ease in August, with headline inflation falling for the fifth consecutive month to 20.12 per cent, according to the Consumer Price Index (CPI) report released yesterday by the National Bureau of Statistics (NBS).

The report showed that the inflation rate dropped by 176 basis points, from 21.88 per cent in July to 20.12 per cent in August — a steeper fall than the average 50-basis-point decline projected by analysts.

Food and Core Inflation Ease

Food inflation, which makes up the bulk of household spending, slowed by 87 basis points to 21.87 per cent in August, down from 22.74 per cent in July. The decline was largely driven by lower prices of staple items such as rice, guinea corn flour, maize flour, sorghum, millet, semolina, and soya milk.

Similarly, core inflation — which excludes volatile items like farm produce and energy — declined by 100 basis points, from 21.33 per cent in July to 20.33 per cent in August.

The report underlined a clear downward trend since April when inflation fell to 23.71 per cent from 24.23 per cent in March. The NBS noted that both monthly and annual inflation trends are aligned, reflecting broad-based disinflation.

Why Prices Are Falling

Analysts say the decline is linked to seasonal and macroeconomic improvements. Bismarck Rewane’s Financial Derivatives Company (FDC) attributed the trend to the harvest season, improved consumer resistance, and relative stability in the foreign exchange market.

“The monthly inflation, which is more reflective of market realities, fell sharply by 1.25 per cent to 0.74 per cent, partly due to the harvest season and reduced aggregate demand,” FDC said. “The magnitude of the decline indicates that the boost in output due to the harvest may have been significant.”

FDC also projected that uniform pricing of refined products and the recently introduced free fuel distribution could further ease inflationary pressures.

However, the firm cautioned that exchange rate volatility and structural bottlenecks remain key drivers of inflation and could limit long-term gains unless addressed.

Stronger Currency, Rising Reserves

Analysts at CardinalStone maintained that the disinflation trend is likely to continue, citing improved foreign exchange stability and stronger fundamentals.

“The positive pass-through of the strengthening currency to inflation is likely to persist in September, with the official rate currently trading below N1,500 per dollar and having appreciated by 2.4 per cent month-to-date,” CardinalStone noted.

They added that Nigeria’s current account is now in surplus, forex reserves have risen to $41.7 billion, and foreign portfolio inflows remain positive, supported by the country’s status as the highest-yield carry trade market in Africa.