AfriPulse
Nigeria’s economic outlook showed signs of relief in August 2025, as the country’s headline inflation rate eased to 20.12%, down from 21.88% in July, according to the National Bureau of Statistics (NBS).
The moderation in inflation marks the fifth consecutive monthly decline since April, offering a rare respite for households grappling with high living costs.
On a month-on-month basis, inflation dropped by 1.76 percentage points, while the year-on-year figure reflected a sharp fall of 12.03 percentage points, compared to 32.15% recorded in August 2024.
In a further boost for the economy, the Naira strengthened to ₦1,497 per dollar at the Nigeria Autonomous Foreign Exchange Market (NAFEM) its strongest level in six months.
READ ALSO: Naira weakens against dollar at parallel market
The 12-month average inflation rate for the period ending August 2025 also dropped to 24.66 per cent, down 6.6 percentage points from the 31.26 per cent recorded in August 2024.
Food inflation remained a key driver but eased notably to 21.87 per cent year-on-year in August 2025 from 37.52 per cent the previous year, while its monthly rate declined to 1.65 per cent from 3.12 per cent in July. Lower prices for staples such as rice, guinea corn flour, maize flour, millet, and soya milk contributed to this easing. Regional disparities persist with the highest year-on-year food inflation in Borno (36.67 per cent ), Kano (30.44 per cent), and Akwa Ibom (29.85 per cent). At the same time, Zamfara, Yobe, and Sokoto recorded the slowest increases.
Urban inflation stood at 19.75 per cent year-on-year, down from 34.58 per cent in August 2024, while rural inflation eased to 20.28 per cent from 29.95 per cent. Both urban and rural areas recorded lower monthly inflation rates than in July 2025.
On the currency front, the naira gained 0.27 per cent or N4 to trade at N1,497 to the dollar on September 15, 2025, its strongest since March 4, 2025. Since the start of September, the naira has appreciated by N28.63 or 1.89 per cent. The parallel market also reflected gains, with the naira strengthening by 1.85 per cent to about N1,510 per dollar.
Analysts attribute the currency strength to improved liquidity and sustained dollar inflows.
Commenting on the development, the CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, linked the slowing inflation to economic stability and urged the Central Bank of Nigeria’s Monetary Policy Committee to consider easing the benchmark interest rate, currently at 27.5 per cent, which significantly exceeds the inflation rate. He emphasised the need to address persistently high food prices and called for policy measures targeting basic goods to ease cost pressures on Nigerians.
Dr Yusuf noted that slowing inflation reflects a stable economy and called on the Monetary Policy Committee of the Central Bank of Nigeria to consider easing the benchmark interest rate at its next meeting next week.
He said, “it is a good thing that we are seeing consistent deceleration in the inflation rate. It indicates that the economy is stabilising and recovering from the shocks of the reform. It is also a reflection of the level of confidence investors have in the economy.”
However, he raised concerns about food inflation, which remains high, saying, “There are still concerns about food prices and the cost of some basic items, which citizens are worried about. So, there’s a need for policy measures to be taken by the government to specifically target issues of food and other basic needs in the economy. This way, the pressure on citizens can be mitigated.
“With this consistent deceleration in inflation, we expect that the CBN should be looking at the possibility of easing its monetary policy stance, gradually relaxing the tightening. The Monetary Policy Rate (MPR) is far higher than the inflation rate, and the gap has been increasing. The MPR is about 27.5 per cent, while inflation has dropped to around 20%. You can see the gap, so we must close it. It’s time to ease the monetary policy stance at least gradually.”
The recently commenced free fuel distribution is expected to ease inflationary pressures in the coming months further. In line with this trend, the CBN is likely to cut the MPR by 25bps at its September MPC meeting. However, the caveat is that Nigeria’s inflation is also driven by exchange rate volatility and structural bottlenecks. Unless these challenges are addressed, the overall impact may be muted. Moreover, seasonal factors such as “ember” month demand and festive activities could counter some of the price relief, particularly as the free distribution currently covers only a few states.
Also, Financial Derivatives Company Limited analysts highlighted harvest season effects, increased consumer resistance, and CBN’s forex market interventions as factors supporting the inflation decline and currency stability. They expect a 25 basis point cut to the Monetary Policy Rate (MPR) at the upcoming MPC meeting. However, they cautioned that exchange rate volatility and structural economic bottlenecks could limit inflation relief, especially with seasonal demand surges ahead.
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