Inflation Slows to 21.88% in July: Is Nigeria at a Turning Point?

Nigeria’s headline inflation slowed to 21.88% in July, marking the fourth consecutive monthly decline, according to the latest data released today. The moderation reflects a combination of easing fuel costs, particularly PMS and diesel, a slowdown in money supply growth, and relative stability in the exchange rate.

While the continued downward trend offers some relief, analysts caution that the pace of decline has slowed sharply, signaling that the economy may be approaching a potential inflection point.

A closer look at the numbers reveals nuanced dynamics behind the headline figure. Month-on-month inflation rose for the second consecutive month, increasing to 1.98% in July from 1.68% in June, equivalent to an annualized rate of 26.36%. Food inflation also ticked higher to 22.74% from 21.97%, despite the ongoing harvest season. Economists attribute this to the temporary reversal of export smuggling and the lingering effects of climate-related disruptions on agricultural supply.

On the positive side, core inflation, which excludes volatile agricultural and energy prices, fell to 21.33% from 22.76%, suggesting that the underlying inflationary pressure is less structural and more driven by transient factors.

Market watchers are now speculating that the Central Bank of Nigeria (CBN) may consider a modest 25 basis points cut to the policy rate at its next Monetary Policy Committee (MPC) meeting in September. However, several risks could alter this expectation: a potential drop in global oil prices—currently at $66 per barrel—could push prices below $60 per barrel by Q4 2025, according to the International Energy Agency (IEA), while any uptick in August’s inflation figures could discourage the MPC from easing rates.

Reflecting on July’s inflation trajectory, economists suggest that while policy measures and energy price adjustments have yielded temporary relief, sustaining a downward trend will require targeted interventions in food supply chains and broader structural reforms. The FDC Think Tank highlights that the next few months will be critical in determining whether Nigeria’s inflation continues its slow descent or begins to stabilize at elevated levels.

@2025 The Ameh News: All Rights Reserved