Nigeria’s Inflation Projected to Ease to 21.34% in July as Harvest Season Boosts Food Supply

Nigeria’s inflation rate is expected to ease further in July, driven by the start of the harvest season and stable exchange rates, according to analysts at Financial Derivatives Company (FDC). Ahead of Friday’s Consumer Price Index (CPI) release by the National Bureau of Statistics (NBS), FDC projects a slowdown to 21.34% year-on-year, down from 22.22% in June. Analysts attribute the moderation to improved food supply and base-year effects, alongside a marginal drop in month-on-month inflation to 1.60%, annualised at 20.77%.

The report noted that July’s harvest has already led to significant price reductions in several essential commodities. Survey data showed price declines for tomatoes (31.82%), yams (18.18%), onions (21.43%), peppers (11.11%), turkey (11.76%), palm oil (4.17%), beans (3.53%), and garri (3.03%). Meanwhile, 68.57% of tracked items—including rice, wheat flour, semovita, eggs, Irish potatoes, and vegetable oil—remained stable, providing further relief for households.

FDC’s analysts also highlighted the stability of the naira in July, with exchange rates holding at around ₦1,530 across both official and parallel markets, supported by the Central Bank of Nigeria’s (CBN) interventions. Additionally, diesel prices dropped by 2% to ₦1,050 per litre, marginally reducing transportation and logistics costs. Lower petrol prices also contributed to easing inflationary pressures.

Year-on-year food inflation is projected to decline to 21.35% from June’s 21.97%, with monthly food inflation dropping to 2.68% from 3.25%. Core inflation—excluding seasonal factors—is also expected to soften to 22.41% from 22.76% in June, driven by improved forex stability and steady energy prices. The harvest season, analysts say, remains the dominant factor in the improved outlook for consumer prices.

Despite the optimistic forecast, FDC warned of potential headwinds. Security challenges in key food-producing states could disrupt supply chains, while falling global oil prices may limit government revenue and currency stability. Furthermore, upcoming seasonal forex demand—particularly from international tuition payments and Christmas inventory restocking—could place renewed pressure on the naira in the coming months.

Source: Leadership