In August 2025, Nigeria’s headline inflation rate eased to 20.12%, down from 21.88% recorded in July, reflecting a positive shift in the country’s economic landscape. This improvement coincided with the Naira reaching its strongest position in six months, trading at N1,497 per US dollar on the Nigeria Autonomous Foreign Exchange Market (NAFEM), signaling enhanced economic stability.
Data from the National Bureau of Statistics (NBS) revealed a month-on-month inflation decline of 1.76 percentage points, marking the fifth consecutive monthly reduction since April. Year-on-year, inflation dropped significantly by 12.03 percentage points from 32.15% in August 2024, underscoring a notable easing of inflationary pressures compared to the previous year.
The average inflation rate over the past 12 months ending August 2025 also fell to 24.66%, a decrease of 6.6 percentage points from the 31.26% recorded in August 2024, further highlighting the downward trend in price increases.
Food inflation, a major contributor to overall inflation, showed considerable moderation, falling to 21.87% year-on-year in August 2025 from 37.52% the year before. Monthly food inflation also slowed to 1.65% from 3.12% in July. This improvement was driven by reduced costs of key staples such as cassava flour, plantain, yam, beans, and groundnut oil. However, regional disparities remain evident, with Borno (36.67%), Kano (30.44%), and Akwa Ibom (29.85%) experiencing the highest food inflation rates, while Zamfara, Yobe, and Sokoto recorded the slowest increases.
Urban inflation decreased to 19.75% year-on-year from 34.58% in August 2024, while rural inflation also eased to 20.28% from 29.95%. Both urban and rural areas saw lower monthly inflation rates compared to July 2025, indicating broad-based price stability improvements.
On the currency front, the Naira appreciated by 0.27% (N4) to N1,497 per dollar on September 15, 2025, marking its strongest level since early March. Since the beginning of September, the currency has gained N28.63 or 1.89%. The parallel market mirrored this trend, with the Naira strengthening by 1.85% to approximately N1,510 per dollar. Analysts attribute this currency appreciation to enhanced liquidity and steady inflows of US dollars.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), linked the deceleration in inflation to growing economic stability. He urged the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to consider lowering the benchmark interest rate, currently at 27.5%, which remains significantly above the inflation rate. Dr. Yusuf emphasized the urgency of addressing persistently high food prices through targeted policy interventions to alleviate the financial burden on Nigerian households.
Speaking to LEADERSHIP, Dr. Yusuf remarked, “The consistent slowdown in inflation signals that the economy is stabilizing and recovering from previous shocks. It also reflects increased investor confidence.” However, he cautioned that food inflation remains a pressing concern, stating, “High prices of essential food items continue to worry citizens. The government must implement policies focused on these basic needs to reduce the cost pressures faced by the population.”
He further advocated for a gradual relaxation of monetary policy, noting, “With inflation steadily declining, the Central Bank should explore easing its monetary stance. The current Monetary Policy Rate (MPR) of 27.5% is considerably higher than the inflation rate, which is around 20%. Narrowing this gap is essential to support economic growth.”
The recent introduction of free fuel distribution is expected to further ease inflationary pressures in the coming months. Reflecting this outlook, the CBN is anticipated to reduce the MPR by 25 basis points at its September MPC meeting. Nonetheless, challenges such as exchange rate fluctuations and structural economic constraints remain, potentially limiting the full impact of these measures. Additionally, seasonal factors like increased demand during the “ember” months and festive periods may offset some of the price relief, especially since the free fuel program currently covers only select states.
Analysts from Financial Derivatives Company Limited highlighted the positive effects of the harvest season, growing consumer resistance to price hikes, and the CBN’s active interventions in the foreign exchange market as key factors supporting the recent decline in inflation and currency stabilization. They also expect a 25 basis point cut to the MPR at the upcoming MPC meeting but warned that ongoing exchange rate volatility and structural bottlenecks could constrain inflation relief, particularly with seasonal demand surges on the horizon.
