Inflation Falls to 14.63% as Food Costs Keep Pressure on Policymakers

By Lateepha Eniola, Assistant Editor

Driven by increasing macroeconomic stability, the average cost of living in Nigeria continues to improve as the inflation rate dropped by 76 basis points to 14.63%.

This moderation is highlighted in the September 2026 Consumer Price Index (CPI) report released yesterday by the National Bureau of Statistics (NBS), which showed headline inflation easing from 15.39% in August down to 14.63% in September

The decline in overall inflation rate was driven by stability in macroeconomic environment, especially currency exchange, although food and energy remained major constraints.

Core inflation, which includes all other items with exception of farm produce and energy, dropped by 34 basis points from 13.29 per cent in August to 12.95 per cent in September.

However, food inflation inched upward by 2.0 basis points from 19.57 per cent in August to 19.59 per cent in September.

A notable improvement was however the improvement in immediate food supply as month-on-month food inflation, for the first time, entered disinflationary trend, dropping by 1.57 per cent in September as against increase of 1.02 per cent in August.

The month-on-month decline was attributed to lower price increases of Guinea corn flour, maize, flour, rice, egg, onion, palm oil, green bean, irish potatoes, okra, tomatoes and plantain among other food items.

Experts said the continuing disinflationary trend signaled positive outlook for the economy.

They however called for combined fiscal and monetary initiatives to address food and energy constraints.

Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf and many think-tanks, including SCM Capital Group, GTI Capital Group and Arthur Steven Asset Management were unanimous that the moderation in inflation was a positive signal on the overall direction of the economy.

Yusuf said the moderation was a positive development that reinforced the disinflationary trend, strengthened macroeconomic stability and improved the prospects for investment, monetary easing and economic recovery.

According to him, the decline in headline inflation alongside the moderation in core inflation indicated an easing of underlying price pressures, with relative stability of the foreign exchange market helping to moderate imported inflation and improve business planning.

“This development has important implications for monetary policy. With inflation moderating, the case for further monetary easing has strengthened, particularly given the elevated cost of credit and its adverse consequences for investment, working capital and productive capacity.

“High borrowing costs have constrained manufacturing, agriculture, construction, distributive trade and MSMEs. A sustained reduction in interest rates would improve credit affordability, ease financing pressures and support private-sector investment.

“However, monetary easing should remain calibrated to inflation expectations, exchange rate conditions and emerging energy-price risks. The objective should be to support productive investment without compromising the gains in macroeconomic stability,” Yusuf said.

Analysts at SCM Capital said they expected the disinflationary trend to continue, providing the monetary authority headroom for further reduction in baseline interest rate.

“Headline inflation is projected to continue its disinflationary trend in October, as the harvest season and import tariff reductions support food availability and keep month-on-month food price increases relatively subdued, providing a buffer against energy-related pressures.

“Continued exchange rate stability is projected to contain imported inflation and limit cost pressures. However, seasonal demand pressures ahead of the festive season and election-related spending could keep price pressures elevated, posing upside risks to non-food inflation.

“Against this backdrop, sustained moderation in headline inflation could provide the Central Bank of Nigeria (CBN) with greater buffer to maintain its current policy stance or consider a gradual easing of monetary conditions, contingent on the persistence of disinflationary trends and the broader macroeconomic outlook,” SCM Capital stated.

Yusuf however noted that food inflation remains a major threat to household welfare, pointing out that the divergence between headline inflation and food inflation is economically significant.

He said: “Food constitutes a disproportionately large share of expenditure among low-income households. Consequently, elevated food inflation erodes real incomes, deepens poverty risks and weakens household consumption.

“The implications extend beyond household welfare. As families allocate increasing proportions of their incomes to food, expenditure on manufactured products, education, healthcare and other services becomes constrained. This weakens effective demand and adversely affects businesses, especially consumer-facing enterprises.

“The persistence of food inflation reflects structural weaknesses in agricultural production and distribution, including insecurity, inadequate rural infrastructure, high logistics costs, post-harvest losses and inefficient market connectivity. Addressing these constraints requires targeted supply-side interventions rather than reliance predominantly on monetary tightening”.

He outlined that as geopolitical crisis in the Middle East has heightened global petroleum market volatility and exposed Nigerian economy to external energy-price shocks, exchange rate stability could moderate the transmission of imported inflation, but cannot fully neutralise rising international energy costs.

He said sharp monthly energy-price increase raises the risk that the recent disinflationary gains could be reversed if higher energy costs persist.

He said the policy priority should be to strengthen domestic energy resilience through reliable electricity supply, expansion of CNG infrastructure, greater adoption of electric mobility and improved domestic refining efficiency.

“A sustainable reduction in inflation requires lowering the economy’s structural dependence on expensive and volatile energy sources,” Yusuf said.

He said the September report strengthens the case for a more balanced inflation-management strategy, noting that while monetary policy remains important for anchoring expectations and sustaining macroeconomic stability, many of the remaining inflationary pressures are rooted in structural and supply-side constraints.

He explained that while the September 2026 inflation report provides credible evidence of progress in macroeconomic stabilisation, the policy challenge is to sustain disinflation through credible macroeconomic management and address the structural factors that keep production, energy, transportation and food costs elevated.

“This requires sustained collaboration among the federal, state and local governments, with greater emphasis on productivity, infrastructure, security, energy efficiency and domestic supply capacity,” Yusuf said.