Inflation Rate Eases for Fifth Month, but Citizens Feel No Relief
Lagos, Nigeria – Nigeria’s inflation rate has declined for the fifth straight month, offering cautious optimism about the country’s economic trajectory. According to the latest figures released by the National Bureau of Statistics (NBS), the inflation rate dropped from 21.88% in July to 20.12% in August 2025, marking the most sustained period of disinflation Inflation in Nigeria Declines Again has seen in nearly three years.
This downward trend reflects macroeconomic adjustments made by the federal government and the Central Bank of Nigeria (CBN), particularly in the areas of foreign exchange and agricultural output.. “This doesn’t mean Nigerians are paying less. They’re just not facing as steep a price hike as before.”
What’s Driving the Current Drop in Inflation?
Alaje pointed to a more stable exchange rate regime implemented by the CBN, which has reduced currency volatility in the parallel market. A move back to a managed float system has helped restore some confidence in the naira, even if prices remain high for imported goods.
Another major contributor is the harvest season, which temporarily increases the availability of local food products. The month-on-month inflation rate fell to 0.74%, reflecting short-term gains in food supply and consumer sentiment.
However, Alaje warned that the easing of inflation must be viewed in context. “Much of the drop is seasonal and technical. It doesn’t necessarily reflect structural changes in the economy. Without deeper reforms, these gains could disappear within a few months.”
Food Prices Remain High Despite Slower Inflation
Even with a slight decrease in the inflation rate, food inflation remains a critical concern. The cost of staple goods like local rice, garri, beans, and vegetable oil continues to rise, putting pressure on low-income and middle-income households.
In major cities like Lagos, Abuja, and Port Harcourt, the price of a 50kg bag of local rice is now over ₦50,000, up from around ₦35,000 just a year ago. For many families, this represents nearly half of their monthly income. Protein-rich foods such as eggs, fish, and poultry have also seen significant increases, often beyond the reach of average consumers.
Alaje noted that food inflation, which remains in double digits, is the most painful form of inflation because it affects everyone — especially the poor. “You can postpone buying a car or luxury item, but you can’t delay eating,” he said. “The inflation drop is good, but for millions of Nigerians, their food budget keeps rising.”
In rural areas, where many people grow their own food, the impact of inflation is slightly less severe. However, even smallholder farmers are struggling with high transportation costs, insecurity, and market access, which limit their ability to bring produce to urban centers efficiently.
Monetary Policy Dilemma: Should the CBN Cut Rates?
With the headline inflation rate showing signs of easing, pressure is mounting on the Central Bank of Nigeria to reduce its Monetary Policy Rate (MPR), currently set at a high 27.5%. Business leaders and manufacturers have argued that the high-interest rate environment is stifling investment and job creation.
However, Alaje urged caution. “A rate cut, though appealing, must be approached carefully. The inflation decline we are seeing is partly due to statistical effects, such as rebasement of the inflation basket and base-year adjustments.
According to him, premature monetary loosening could reverse the gains made so far. Historically, Nigeria has faced challenges when reacting too quickly to short-term improvements in economic data. In the past, sudden drops in the MPR led to capital flight, naira devaluation, and inflation spikes , all of which erode consumer purchasing power.
How Insecurity Drives Inflation in Food-Producing Regions
One of the most persistent Inflation in Nigeria Declines Again and overlooked causes of inflation in Nigeria is insecurity, especially in the North Central and North East regions , the country’s breadbasket.
Armed banditry, herder-farmer conflicts, and insurgency in rural areas have displaced thousands of farmers. These disruptions reduce the availability of local produce, push up market prices, and increase Nigeria’s reliance on expensive imported foods.
“Security is not just a national issue — it’s an economic issue,” Alaje explained. “If farmers can’t access their land or safely transport their goods, supply drops and prices rise. It’s that simple.”
Improving security in agricultural zones, he argued, is essential not just for food self-sufficiency, but for sustainable inflation control. He urged the federal government to allocate more funds to rural policing, farm protection programs, and community-based security architecture.
The Case for Supporting Local Production
Another core strategy Alaje recommended is reducing Nigeria’s dependence on imports by boosting local manufacturing. This includes offering incentives for manufacturers to produce consumer goods domestically and providing consistent policy support to ensure market stability.
“Nigeria imports too much of what it consumes,” he said. “From processed foods to basic household items, we’re spending valuable foreign exchange to buy what we can make here.”
Stabilizing the Exchange Rate: The CBN’s Balancing Act
Alaje commended the Central Bank’s recent return to a managed float exchange regime, which has brought relative calm to the foreign exchange market. Under the new system, the naira trades between ₦1,500 and ₦1,600 per US dollar in the parallel market , a significant improvement over the chaotic swings of earlier in the year.
However, he cautioned that this stability must be sustained deliberately. “The exchange rate affects everything in Nigeria. From the price of diesel to the cost of imported raw materials, currency swings create inflation overnight.”
To maintain stability, Alaje called for improved forex reserves, tighter regulation of the black market, and increased support for non-oil exports that generate forex revenue.
Why Nigeria Needs to Prioritize Industrial Transformation
Beyond short-term monetary tweaks, Alaje argued that Nigeria’s long-term inflation problem is rooted in its lack of industrial capacity. Unlike developed economies where inflation is triggered by demand surges, Nigeria faces cost-push inflation due to production inefficiencies, poor infrastructure, and energy deficits.
“We can’t just manage inflation , we have to outgrow it,” he said. “That means generating more electricity and using it to build industries that employ people and produce goods.”
He cited that Nigeria’s tolerance for inflation , often between 18% and 20% , would be unacceptable in economies with high productivity. “Because we don’t produce much, we rely on imports. And because we rely on imports, we suffer every time the global market shifts.”
Role of State Governments in Fighting Inflation
“Inflation figures are driven by market prices,” he said. “If states build roads that link farms to cities, food will move more efficiently, and prices will drop.”
He recommended that states collaborate with the Nigeria Railway Corporation to create affordable, long-haul logistics corridors for agricultural goods. Currently, the cost of transporting food from Benue to Lagos can account for 30%–40% of the final retail price.
By improving rural infrastructure , especially feeder roads, storage facilities, and electricity access , state governments can lower supply chain costs and help stabilize food prices across the country.