The National Bureau of Statistics (NBS) unveiled its March 2025 Consumer Price Index (CPI) report, spotlighting a pivotal shift in Nigeria’s inflation trajectory. After two months of decline, headline inflation surged to 24.23% year-on-year, up from 23.18% in February 2025, signalling renewed inflationary momentum within the economy. This uptick underscores the fragility of recent price stabilization efforts amid complex macroeconomic dynamics.1
Food inflation, which accounts for 40% of the CPI basket (down from 51% before the rebasing), slowed year-on-year to 21.79% in March from 23.51% in February, reflecting relative stability in food and transport costs. However, on a month-on-month basis, food inflation rose to 2.2% from 1.7% in February. This uptick can be partly linked to the suspension of the Naira-for-Crude policy, which contributed to higher Premium Motor Spirit (PMS) prices, feeding into short-term food price pressures.
Core inflation, excluding volatile food and energy components, rose sharply to 24.43% from 23.01%, marking its second consecutive increase. The monthly core inflation rate jumped to 3.7% from 2.5%, pointing to entrenched price pressures in non-volatile sectors.
Headline Inflation Snaps Losing Streak as Core Pressures Mount
The National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for March 2025, showing a reversal in the downward inflation trend observed in recent months.1
The rise in headline inflation was largely driven by an uptick in core inflation, which rose to 24.43% from 23.01% in the previous month. The increase suggests growing price pressures in non-food categories, particularly housing, utilities, and other essential services. This increase signals underlying price pressures beyond the volatile components such as the cost of services.
Core Inflation Remains the Main Culprit
Core inflation, which excludes volatile items such as food and energy rose sharply to 24.43%, reflects the broader price pressures in the economy and often offers a more accurate reflection of the underlying inflationary trend. The sharp rise in core inflation suggests that inflationary pressures are intensifying in non-food sectors, particularly in housing, utilities, and essential services.
One of the factors contributing to this increase is the 50% hike in mobile and data service tariffs during the month by the Nigerian Communications Commission (NCC) which significantly impacted the Information and Communication sub-index.2 This tariff increase highlights the growing sensitivity of Nigeria’s telecom sector to policy changes and regulatory shifts, which are contributing to overall price pressures, becoming increasingly essential, especially in a digitized economy.
Food Inflation Shows Signs of Moderation
While core inflation mounted, food inflation, which makes up approximately 40% of the CPI basket, slowed down in March 2025. The food inflation rate moderated to 21.79%, compared to 23.51% in February. This decline is largely attributed to relative stability in the prices of key staple foods, as well as a slowdown in transport cost increases, which have a significant impact on food distribution.
The suspension of the Naira-for-Crude policy3 caused PMS prices to rise marginally, but this didn’t lead to a major jump in transport costs. As a result, the impact on food prices was limited, giving consumers some short-term relief from higher living costs.
Currency Depreciation Adds to Inflationary Woes
The foreign exchange market saw significant volatility in March 2025, with the naira depreciating by approximately 2.5% against the U.S. dollar, closing at ₦1,536/$, down from ₦1,499/$ at the beginning of the month. Despite the Central Bank of Nigeria (CBN) intervention into the market, the naira continued to slide under sustained pressure from foreign exchange demand. This depreciation reflects ongoing imbalances in Nigeria’s FX market, exacerbated by capital outflows and a general lack of investor confidence.
This weakening naira presents significant inflation risks. As the cost of imports rises, the prices of foreign goods—particularly fuel, machinery, and other critical imports—are likely to rise further. This is especially concerning for an import-dependent economy like Nigeria, where a large portion of goods and services relies on foreign inputs. With the naira’s depreciation, the pass-through effect to domestic prices will likely remain pronounced, contributing to continued inflationary pressures in the second quarter of 2025. The naira’s fate and Nigeria’s inflation outlook will ultimately hinge on forex reserves, oil prices, and the CBN’s ability to keep monetary policy on course. Recent trends are encouraging, but inflation isn’t waving the white flag just yet.
Naira-for-Crude Policy Suspension and Its Ripple Effects
Another key development in March 2025 was the suspension of the Naira-for-Crude deal between the Nigerian National Petroleum Corporation (NNPC) and Dangote Refinery. Under this arrangement, Dangote Refinery was permitted to purchase crude oil in naira. However, the deal took a turn when NNPCL suspended sales, resulting in the termination of the arrangement on March 10, following the expiration of the contract, according to NNPCL.3
This suspension caused immediate effects on both the fuel and currency markets. Dangote Refinery, which had been purchasing large quantities of crude oil, now faced challenges in sourcing crude oil in naira. However, in the global oil market, crude oil prices began to rise from $69.87 on March 10 to $74.38 by the end of the month4—the suspension further pressured the naira and pushed up local petrol prices, contributing to inflationary pressures in the economy.
The fallout from the Naira-for-Crude deal suspension also raised concerns about the stability of Nigeria’s oil industry and its relationship with key players like Dangote Refinery, potentially threatening to exacerbate Nigeria’s energy insecurity.
Global Factors: External Shocks and Trade Tariffs
In addition to domestic factors, global dynamics are adding another layer of complexity to Nigeria’s inflation picture. A significant external shock came in the form of a 14% tariff imposed by the U.S. on Nigerian exports.5 This will likely raise the cost of Nigerian exports, especially non-oil commodities, and reduce the country’s trade competitiveness. As Nigerian producers face higher tariffs on their exports, this could result in lower export earnings and weaker trade terms, which, in turn, would put additional pressure on Nigeria’s current account and further strain the naira.
The confluence of these domestic and global pressures suggests that Nigeria’s inflation story is far from over. With continued currency depreciation, a volatile oil market, and rising global trade barriers, the risk of further inflationary shocks may remains high in the coming months.
Bottom line
The March 2025 CPI report highlights the challenges facing Nigeria’s economy, including rising core inflation, currency depreciation, and disruptions in key policy initiatives like the Naira-for-Crude deal.
Additionally, global trade dynamics—especially the 14% tariff imposed by the U.S. on Nigerian exports could further exacerbate domestic price levels through higher landed costs and weaker trade terms. Nigeria remains highly import-dependent, and any further weakening of the Naira could amplify inflationary pressures in Q2 2025. A weaker Naira increases the cost of imports, further contributing to inflationary pressures.
Nigeria’s inflationary pressure intensified in March 2025, driven by rising core inflation, currency depreciation, and external shocks. The naira weakened despite CBN intervention, as capital outflows, suspension of the Naira-for-Crude policy, and U.S.-led global trade tariffs strained the economy. With import costs rising and monetary tools under pressure, inflation risks remain may remain elevated in the near term.
