Nigeria's Inflation Eases: Understanding the September Trends

Inflation Falls to 18.02% in September, Sixth Month of Decline

Nigeria’s headline inflation fell to 18.02% in September, the sixth straight monthly drop. We examine rebasing, the CBN rate cut, risks and what comes next.

Atlantic Post

October 17, 2025

6–9 minutes

CBN, economic reform, Financial Markets, Food Prices, Inflation, Monetary Policy, Naira, NBS, Nigeria Economy

Nigeria recorded a dramatic easing of price pressures in September 2025. The National Bureau of Statistics reported headline inflation at 18.02 per cent year on year down from 20.12 per cent in August. This marks the sixth consecutive monthly deceleration. It is also the first time in three years that headline inflation has slipped below 20 per cent.

At first glance the numbers offer cause for optimism. Monthly inflation slowed by 2.1 percentage points and the 12 month average has fallen sharply compared with the same period last year. Food inflation, the category that hits poorest households hardest, eased to 16.87 per cent year on year. It was negative month on month as prices for staple items like maize, garri, beans, tomatoes and onions declined.

But beneath the headline lies a contested, technical and highly political story. The sharp moderation this year is largely due to a methodological rebasing of the CPI. This update changed the basket of goods and the reference base year. The rebasing materially changed weights and, in effect, lowered the measured rate of price growth.

That statistical reset matters. It makes comparisons with late 2024 and earlier 2025 both necessary and fraught. Economists and market participants now ask a question. Does the decline show sustained gains in supply and demand? Or is it, at least partly, an artefact of accounting?

The Central Bank of Nigeria wasted no time adjusting policy to the new readings. In late September the Monetary Policy Committee lowered the Monetary Policy Rate by 50 basis points to 27.00 per cent.

The cut was the first since 2020. The committee explicitly justified it as a response to easing inflation. They also cited the need to stimulate growth. Yet the communique contained other measures that complicate the narrative.

The CBN adjusted the cash reserve requirement. It also adjusted other liquidity tools that restrict the ability of banks to expand credit. In short the bank eased one lever while tightening others. That mixed messaging raises questions about the coherence of macro policy.

Analysts were quick to voice both encouragement and caution. The senior research analyst at FXTM had forecast a fall toward 18.8 per cent, citing softer food prices and a firmer naira as drivers.

Asset managers and local research houses, including AIICO Capital and Arthur Steven Asset Management, see room for further rate cuts. This potential is if disinflation persists. It also depends on energy and FX markets remaining stable.

At the same time, they warn that lasting price stability will depend on policy discipline. Stronger food security measures are necessary. Continued FX stability is also crucial.

We must thus place the current moderation in context.

First the statistical base matters. The NBS rebased the CPI to a 2024 reference year which updated weights and item composition in the basket. That change mechanically reduced the headline rate.

Economists accept rebasing as good statistical practice but it also means the headline fall should be interpreted with caution. When you change the basket you change the measuring rod. Analysts must hence look at underlying indicators like core inflation trends, wage growth, and private sector price expectations.

Core inflation remains sticky. The NBS recorded core inflation at 19.53 per cent in September. That measure strips out farm produce and energy and gives a clearer reading of underlying non-food price pressures. A headline fall with a still elevated core suggests the economy is only partially through disinflation.

Second there is the question of policy coherence. The CBN cut its policy rate. It also raised or recalibrated other instruments. Notably, these include the cash reserve requirement rules and standing facility corridor. Higher CRR on some deposits and other liquidity measures act like a brake on bank lending. These measures blunt any stimulatory effect of the MPR cut.

Moreover, fiscal policy remains an outsized variable. Large deficits financed in unstable ways will continue to complicate the CBN’s path to sustainable disinflation. The bank’s decisions hence look tactical rather than strategic.

Third the naira and energy prices stay pivotal. The September data benefitted from a modest strengthening of the naira. It was reported at its strongest level in some months. Analysts cited this as part of the reason food and non traded goods prices cooled.

A resumption of FX volatility or an energy price shock would quickly reverse gains. Supply side shocks in food markets are especially pernicious because they transmit rapidly into headline inflation and into popular hardship.

The September month on month food inflation was negative, but that does not mean food security problems have been solved. Seasonal harvests and inventory cycles will play a role in coming months.

Fourth the distribution of inflation across states and between urban and rural areas tells a mixed story. The NBS data show wide variations. Some states like Adamawa and Katsina recorded the highest headline increases year on year. In contrast, Anambra, Niger, and Bauchi recorded the slowest rises.

On a month on month basis a few northern states recorded very large increases in prices of specific items. Meanwhile, other states recorded declines. The national average masks these local dynamics. Any claim that Nigerians universally feel relief from price pressures is thus premature.

What this means for ordinary Nigerians is stark and simple. If the disinflation trend is real and sustained, the reduction in the policy rate will help business activity. It could reduce nominal borrowing costs for firms. It also frees some breathing space for households.

If the decline is largely statistical or fragile, cutting rates will result in a policy mistake. This mistake would leave the central bank with fewer options if inflation resurges.

Asset managers and currency traders will watch wage negotiations closely. They will also closely monitor food market developments. The fiscal stance will be another focus in the coming weeks.

The political economy matters too. The Tinubu administration’s reforms of fuel subsidies and exchange rate unification imposed painful short term costs in 2023 and 2024. The healing of those costs will not be achieved by statistical fixes alone. Structural measures are required.

Investments are needed in agricultural productivity and logistics. Social protection should be targeted to shield the poorest. Credible fiscal plans must be created to reduce reliance on central bank financing. Without those elements, any victory claimed this month will be vulnerable to reversal.

For the markets the implications are immediate. Bond yields are to respond to signals from the next MPC meeting. Several market houses are considering the possibility of further easing before year end.

This depends on whether CPI remains on a gentle slope downwards. But banks will also price in the higher effective cost of reserves. They will also consider the constrained lending ability created by the CBN’s other measures.

The outcome is tighter credit for small business even as headline borrowing costs fall a little. That is a perverse outcome for growth and employment.

Policy recommendations are clear and urgent.

First, transparency and communication from the NBS and the CBN must remain robust. Rebased statistics must come with reconciliations. These reconciliations allow policymakers and the public to understand what is mechanical and what is real.
Second, fiscal consolidation and targeted social spending must go with monetary easing.
Third, a focus on food security is essential. Investments in storage, logistics and inputs will reduce the economy’s vulnerability to seasonal and regional price shocks.
Fourth, the CBN should avoid mixed signalling.

If it wants to pursue a growth friendly easing cycle, it should ensure this cycle is data driven. It must align its liquidity and reserve policies. This alignment ensures they do not work at cross purposes.

Nigeria’s September inflation print is a welcome development in a long and painful run of high prices. But it is not a cure. It is a reprieve. Policy choices in Abuja and on Broad Street will be crucial. They will decide the difference between merely a reprieve and a full recovery in the weeks ahead.

If actions match the rhetoric, the country is finally on a path toward normalising price pressures. This will help in restoring sustainable growth. If they do not, the sub-20 per cent figure will look ephemeral. With the clarity of hindsight, it is just a statistical respite.