With economists predicting that headline inflation may drop to 18.46 percent in September 2025, down substantially from 20.12 percent in August, due to lowering food costs, steady gasoline prices, and currency appreciation, Nigeria may finally be seeing the start of meaningful disinflation.
According to United Capital Research, this might be a major turning point in the nation’s brutal inflationary cycle.
Although the decline is positive, many analysts caution that it will not be an easy or straightforward route to the government’s 15 percent target.
A Combination Of Moderating Forces
United Capital ascribes the anticipated decrease in inflation to a confluence of positive developments, including declining food prices, a steady Premium Motor Spirit (PMS) price, and an increase in the value of the naira relative to the US dollar.
The National Bureau of Statistics (NBS) reports that prices for the majority of food items decreased month over month in September. Yams dropped 2.73 percent, brown beans 2.35 percent, soya beans 2.26 percent, local rice 2.04 percent, white beans 1.01 percent, yellow maize 3.95 percent, and white maize 3.57 percent per kilogramme. Additionally, imported rice decreased by 0.42 percent. The only crops that deviated from the trend were sorghum (up 0.84 percent) and garri (up 1.02%).
Global oil movements, meanwhile, provided little support or opposition: the price of a barrel of Bonny Light crude dropped from roughly $70.55 to $70.20. Domestically, the PMS pump price remained stable at N865 per litre in the stations under observation; this stability limits additional inflationary spillovers into logistics, hospitality, and transportation.
The naira gained almost 2.47 percent, from an average of N1,534.75/$1 in August to N1,497.79/$1 in September, which is perhaps the most significant development. Pressures from import costs were lessened because to the currency increase, particularly for commodities like rice.
United Capital now believes that additional monetary easing may be possible in light of these developments. Their average inflation estimate for Q4 2025 is 16.07 percent, which is little higher than the 2025 Budget’s target of 15 percent but near enough to merit notice.
According to them, if no major shock occurs, the Central Bank of Nigeria (CBN) would feel pressured to lower interest rates once more during its November 24–25 MPC meeting.
Outside Voices: Wary But Optimistic
Nigeria’s September trajectory is “a welcome development,” according to Razia Khan, head of research for Africa and the Middle East at Standard Chartered, who told the Financial Times that the central bank’s recent rate fall to 27 percent already portends “more easing to come.”
The World Bank’s Lead Economist for Nigeria, Alex Sienaert, has issued a warning that while growth is strong, inflation is still a major problem.
To consolidate gains, he advocated for monetary and budgetary discipline.
Additionally, credit rating companies are paying attention. Nigeria’s sovereign rating was raised by Moody’s to B3, citing improvements in fiscal and external measures as inflationary pressures start to subside. However, there were restrictions attached to the upgrade: the agency cautioned that inflation and borrowing prices needed to continue to decline or face reversal.
Paul Alaje, Chief Economist of SPM Professionals, views the predictions as plausible yet brittle on the local level.
Given the recent declines in food prices and a somewhat stronger naira, he added, the 18.46 percent forecast is reasonable. However, that doesn’t eliminate a variety of second-round dangers; supply shocks, security lapses, or additional external shocks can reignite inflation.
The 15% goal is presented as aspirational by Tope Fasua, President Tinubu’s Special Advisor on Economic Affairs and a well-known analyst. “15 percent is a stretch goal, not a floor,” he contends. To support macro stability, he has, however, called for improved tax generation and more stringent controls on public spending in media criticism.
Structurally speaking, the World Bank’s Nigeria Development Update (NDU) highlights that growth-enhancing reforms in public investment, energy, agriculture, and social protection must be implemented in tandem with goods-price stability. The paper emphasizes that whereas macro increases are desirable, their sustainability depends on productivity and inclusiveness.
Nevertheless, economists emphasize a persistently bleak picture: Nigeria continues to face significant fiscal responsibilities, a debt-to-GDP ratio exceeding 50%, and ongoing pressures in the areas of infrastructure, food supply, and insecurity.
Hazards That Might Break the Trend
Structural and Supply Shocks: Low input consumption, climate stressors, and insecurity continue to threaten Nigeria’s agricultural output. Growing insecurity in Benue State alone can reduce crop and livestock productivity by 0.21 and 0.31 percent, respectively, according to a recent academic study. In the event that these impacts spread, food inflation can pick up speed again.
External Volatility: Gains from the present stability in PMS and the naira could be jeopardized by an abrupt spike in world oil prices or exchange rate pressures (such as capital outflows). Stress on external finance may also make it more difficult for the central bank to protect the currency.
Fiscal Mismatch: Many economists believe that the 2025 budget’s projections of a sharp decline in inflation (from about 34% to 15%) and a significant increase in the value of the naira are too optimistic. Among others, the Lagos Chamber of Commerce and Industry has warned that if fiscal restraint is not maintained, inflation might remain well above 30%. Monetary tightening may reappear if government borrowing or deficits re-inflate.
Monetary Tightening Reaction: The CBN has already started to relax policy; continued disinflation will determine whether or not more cuts are desired. However, there is a chance that policy will be reversed if inflation does not decline to 15%.
Evaluating the Odds: The trajectory indicates momentum, rising from 20.12 percent in August to an estimated 18.46 percent in September. But Nigeria faces a challenging and constrained road to reach 15 percent.
Positive Situation
Inflation may gradually rise into the high teens by Q1 2026 and reach 15% by the middle of the year if the food supply is stable, security improves, foreign inflows continue, and the naira maintains its value. In this case, the CBN would have more latitude to start lowering interest rates again, which would increase lending and spur economic expansion.
Base Case (More Probability)
Due to persistent structural rigidities and sporadic price shocks, inflation fails to surpass 15 percent by the end of 2025, although it ends at roughly 15 to 17 percent [United Capital’s 16.07 percent is already conservatively below their baseline]. The CBN will continue to exercise caution.
Negative Situation
Inflation rises back to 20 percent due to a supply shock (such as crop failure or fuel disruption), a decline in the value of the naira, or fiscal slippage. Growth would be halted if monetary policy had to return to its aggressive stance.
Consequences and Prospects
Consumers, particularly low-income households whose budgets are dominated by food and energy, would see gradual alleviation if inflation continued on its lower trajectory. Stable borrowing rates and input costs may help businesses plan more predictably.
However, without more extensive reforms, the benefits run the risk of being brittle. In order for disinflation to persist,
Nigeria Must Make an Effort
Agricultural reforms include raising yields, decreasing friction in the food supply chain, and improving infrastructure to even out regional pricing differences.
Reducing waste, increasing non-oil income, and restricting domestic borrowing that rivals private sector lending are all examples of fiscal consolidation.
Avoiding premature easing until the deflation trend is well established is an example of monetary wisdom.
Having robust reserves and external buffers to absorb global volatility is known as a shock buffer.
Even the World Bank cautions that in order to achieve inclusive growth, economic stability must be lifted; else, the price alleviation will only last temporarily.
According to economist Stephen Iloba, Nigeria is currently at a more optimistic phase of its history. Although there is no certainty of disinflation, the economy has considerable breathing room thanks to declining food prices, exchange rate relief, and steady energy prices.
“Whether policymakers and markets maintain the discipline now will determine whether 15 percent becomes a realistic benchmark or stays a far-off goal.”
MPC: A Rise in Hope
Many people believe that the upcoming CBN MPC meeting, which is scheduled for November 24–25, would be a turning point. Many experts will be keenly monitoring it for indications that the CBN is waiting for further information before taking action, or that the monetary posture has changed from hawkish to gradual accommodation.
