Nigeria’s inflation outlook shows signs of stabilization, but risks from food insecurity and potential fuel price hikes threaten to derail the Central Bank of Nigeria’s (CBN) plans for monetary easing, analysts warn.
According to the latest data from the National Bureau of Statistics (NBS), headline inflation eased slightly to 22.97 per cent in May from 23.71 per cent in April, reflecting the early gains of monetary tightening and improved foreign exchange liquidity.
Core inflation, which stood at 22.28 per cent, down from 23.39 per cent in April, has also begun to moderate, driven by a more stable naira and declining Premium Motor Spirit (PMS) prices.
Analysts note that the disinflation is also aided by a favourable base effect from 2024, but they caution that the trend may be short-lived.
“On the domestic front, food inflation remains high and vulnerable to shocks,” analysts at Comercio Partners said in a recent report. “Security challenges in key food-producing states like Benue, coupled with the onset of the rainy season, are disrupting farming activity.”
NBS disclosed that food inflation inched down to 21.14 per cent from 21.26 per cent. On a month-on-month basis, food inflation rose to 2.19 per cent from 2.06 per cent, reflecting some seasonal pressure
The report also showed concerns over flooding and logistical bottlenecks in rural areas, warning these could tighten food supply chains and drive up prices in the coming months.
Externally, geopolitical tensions are adding new layers of uncertainty. Rising hostilities in the Middle East, particularly between Israel and Iran, have reignited fears of an oil price surge, with Brent crude flirting with the $90–$100 per barrel range.
“A sustained increase in global oil prices could push local PMS prices above ₦1,000 per litre,” the report said, “reversing recent gains in transport cost relief and reintroducing inflationary pressures.”
Although domestic refining through Dangote Refinery offers some insulation, crude oil remains the core input. Higher international prices translate directly into costlier local production and distribution, especially in transport and food, which together make up a large share of household spending.
As the CBN prepares for its next Monetary Policy Committee (MPC) meeting, analysts believe the current signs of disinflation could provide scope for a rate cut later in the year. However, any resurgence in food or fuel price pressures could prompt further tightening.
“With the fuel market now fully deregulated, Nigeria is increasingly exposed to external oil shocks,” Comercio Partners said. “Geopolitical instability doesn’t just impact trade, it filters through to local inflation, eroding household purchasing power and complicating monetary policy.”
While the moderation in inflation offers a glimmer of hope, the CBN’s path to easing remains clouded by persistent structural challenges and a volatile global environment. For now, inflation’s path remains fragile, and any spike in food or fuel prices could undercut recent macroeconomic gains, it said.
