Nigeria’s inflation trajectory is expected to strengthen significantly in the months ahead, with headline inflation projected to decline to about 15.52 per cent this month.

This is the position of analysts at Cowry Asset Management Limited.The firm’s outlook suggested that the country is entering a more stable phase of price moderation, supported by a combination of improving macroeconomic conditions and structural adjustments that are gradually taking effect across various sectors.

It attributed the anticipated moderation to a confluence of factors, including favourable development, noting that a more stable exchange rate is helping to ease imported inflation pressures.

The analysts also noted that improved food supply dynamics, driven by better harvesting cycles, enhanced market distribution, and early steps in addressing logistics bottlenecks, are providing incremental support to food price stability.

The firm also points to lingering base-year effects, which continue to exert downward pressure on annual inflation readings, reinforcing the broader disinflationary pattern that has persisted in recent months.

Despite this optimistic trajectory, the report stressed that Nigeria’s inflation outlook remains far from risk-free. The firm highlights the latest month-on-month uptick in inflation as evidence that short-term price pressures are still active beneath the surface.

Food inflation, in particular, remains highly vulnerable. Supply chain disruptions, unfavourable weather patterns and persistent security concerns across key food-producing belts continue to undermine efforts to stabilise food prices, it said.
The vulnerability means that while annual inflation may ease, consumers may still experience sporadic price spikes driven by supply-side constraints.

Core inflation is also expected to move lower, but at a relatively slow and steady pace.
Structural cost pressures, most notably those associated with transportation, housing, healthcare, and other essential services, remain deeply entrenched.
With elevated energy and logistics costs still filtering through the economy, the pace of decline in core inflation is likely to be gradual rather than dramatic.
Energy price volatility has been a notable feature of recent weeks, but Cowry Asset Management believes its impact on headline inflation will remain muted.
This is largely due to the relatively small weighting of energy products within Nigeria’s consumer price index, which naturally dampens the pass-through effect of changes in pump prices or swings in global crude oil benchmarks.

As a result, the domestic inflation outlook is expected to remain anchored even if international energy markets experience periods of turbulence.
These dynamics form the backdrop for a highly anticipated meeting of the Central Bank’s Monetary Policy Committee next week, one that Cowry Asset Management described as taking place at a defining moment for Nigeria’s macroeconomic landscape.

The steady decline in inflation since September has fuelled expectations across financial markets that the MPC may introduce another round of monetary easing. Businesses, investors, and analysts widely anticipate a reduction of between 100 and 200 basis points in the Monetary Policy Rate, potentially extending the Central Bank’s dovish stance as it seeks to stimulate the sluggish real economy.

Yet, despite the encouraging inflation narrative, Nigeria’s underlying economic conditions remain challenging. Cowry Asset Management noted that high operating costs continue to weigh heavily on businesses, while fragile consumer demand reflects the persistent strain on household incomes.

Structural bottlenecks, from inadequate infrastructure and logistics inefficiencies to energy supply challenges and security concerns, have continued to suppress growth momentum. These pressures have left the economy vulnerable, even as inflation shows signs of easing.

Against this complex backdrop, the MPC faces a delicate balancing act. Policymakers must carefully calibrate interest rates to support economic activity and ease financial conditions without jeopardising the hard-won progress on inflation.