Inflation is one of the most critical economic indicators in Nigeria, shaping the cost of living, household budgets, and government policy. Yet, despite its frequent mention in news headlines, the concept is often misunderstood.
Recent figures from the National Bureau of Statistics (NBS) show headline inflation eased to 20.12 per cent in August 2025, down from 21.88 per cent in July and significantly below the 32.15 per cent recorded a year earlier. This marks the fifth consecutive month of decline, fuelling optimism that policy measures are beginning to yield results. On a month-on-month basis, inflation slowed to 0.74 per cent in August, compared with 1.99 per cent in July.
But what does this mean for Nigerians?
What Inflation Really Measures
Inflation reflects the rate at which prices rise across a wide range of goods and services—from food and housing to transport and education. In Nigeria, this is tracked through the Consumer Price Index (CPI), which monitors changes over time.
A common misconception is that lower inflation means prices are falling. In reality, it means they are rising more slowly. For instance, if a bag of rice cost ₦50,000 last year and ₦65,000 this year, reduced inflation simply means the next increase may be less steep, not that prices will drop. A true fall in prices, known as deflation, is rare and often signals economic weakness.
Why Inflation Is Easing
Nigeria’s recent slowdown in inflation is linked to multiple factors:
Improved foreign exchange stability
Better food supply from early harvests
Moderation in global commodity prices
Core inflation, which excludes food and energy, stood at 20.33 per cent in August, down from 27.58 per cent the previous year. This suggests that underlying price pressures are gradually easing.
Food Prices Still Bite
Despite the broader decline, food inflation remains stubbornly high at 21.87 per cent, only slightly below July’s 22.74 per cent. Persistent insecurity in farming areas, climate shocks, and high transport costs continue to strain supply. Regional disparities are also evident: Zamfara reported 11.82 per cent inflation, while Ekiti and Kano stood at 28.17 and 27.27 per cent respectively.
Policy Response and Risks Ahead
The Central Bank of Nigeria (CBN) has held its Monetary Policy Rate at 27.5 per cent since July. Governor Olayemi Cardoso has hinted that rates could be cut if inflation maintains its downward path. Analysts, however, caution that global oil price volatility or renewed subsidy reforms could quickly reverse the gains.
What It Means for Households
For ordinary Nigerians, the key question is whether easing inflation translates into greater purchasing power. With inflation still in double digits, immediate relief is unlikely. Nonetheless, if the downward trend continues, the pressure on incomes may gradually ease, providing households with some breathing space.
