The Central Bank of Nigeria (CBN) has projected that Nigeria's inflation rate will continue to moderate in the short to medium term. This forecast is based on improved food supply during the harvest season, foreign exchange stability, and the delayed effects of previous monetary tightening. The CBN's Monetary Policy Committee (MPC) noted a decline in headline, food, and core inflation in its 307th meeting.
According to the CBN, headline inflation slowed to 15.39% in August 2026 from 15.43% in July, while food inflation declined to 19.57% from 20.31% over the same period. Core inflation also moderated to 13.92% in August from 14.97% in July. The moderation in inflation is attributed to the impact of previous monetary policy tightening, sustained exchange-rate stability, and improved inflation expectations.
The CBN Governor, Olayemi Cardoso, stated that inflation is projected to moderate further in the short to medium term, driven by stability in the foreign exchange market, the lagged impact of earlier monetary policy tightening, and expectations of improved food supply as the harvest season progresses. However, the bank also identified potential risks that could undermine this projection.
The CBN warned that prolonged geopolitical tensions in the Middle East and election-related spending could present upside risks to price development. The conflict between the US and Israel with Iran, which started in February, has affected energy supplies and regional security. Additionally, fighting between Saudi Arabia and Yemen's Houthis has intensified, disrupting the constant flow of oil in the oil-producing region.
The tension in the Middle East could contribute to further increases in global oil prices, which would impact Nigeria's economy. Nigeria's 2027 general election is scheduled to be held around early 2027, amid tightened interest and election-related spending. The CBN cautioned that these factors could put renewed pressure on prices in Nigeria.
The CBN also noted that global inflation risks remained tilted to the upside due to persistent supply chain disruptions, elevated crude oil and other commodity prices, and increasing trade fragmentation. These pressures, combined with the possibility of renewed geopolitical tensions, could delay the normalisation of monetary policy globally.
Despite these risks, Nigeria's economy continues to expand, with real GDP growth accelerating to 4.43% in the second quarter of 2026 from 3.89% in the first quarter. The non-oil sector grew by 4.31%, while oil-sector growth accelerated to 7.31% in the second quarter. The CBN expects domestic output growth to remain resilient for the rest of 2026, supported by improved crude oil production, agriculture, and other business activities.
Key points
- The CBN warns that prolonged geopolitical tensions in the Middle East and election-related spending could undermine Nigeria's inflation moderation.
- Nigeria's inflation rate is expected to moderate further in the short to medium term, driven by stability in the foreign exchange market and improved food supply.
- The country's economy continues to expand, with real GDP growth accelerating to 4.43% in the second quarter of 2026.
