Nigeria saw a decline in its inflation print for April 2025, following the January 2025 rebasing, after the trend reversed in March due to an uptick. In April, inflation declined again, signalling a return to the earlier downward path.
The latest Consumer Price Index (CPI) data released by the National Bureau of Statistics (NBS) shows that Nigeria’s headline inflation moderated to 23.7% year-on-year (YoY) in April 2025, down from 24.2% in March. 1 This marks a notable slowdown in the pace of price increases, driven primarily by easing inflationary pressures in both the food and core components.
Food inflation declined to 21.3% YoY from 21.8% in March, while core inflation moderated more significantly to 23.4% YoY from 24.4%. On a month-on-month (MoM) basis, inflation stood at 1.9% in April, a marked deceleration from the 3.9% increase recorded in March.
This divergence may influence the Central Bank of Nigeria’s upcoming Monetary Policy Committee (MPC) meeting scheduled for the 20th of May 2025.
Cooling Prices, Rising Hopes: Nigeria’s Inflation Eases as Growth Holds
The April data reverses the inflation uptick observed in March, signalling a possible stabilization phase. The moderation reflects a combination of factors, including relative price stability across key consumer categories, less exchange rate volatility, and the absence of fuel price shocks during the month.
Unlike prior months, April did not experience any adjustments to petrol prices or increase in mobile and data service tariff which in previous periods have contributed significantly to inflationary pressures.
Another contributing factor to the inflation dynamics is the high base effect following the January rebasing of the CPI basket, which artificially lowers the year-on-year inflation rate by increasing the base level of prices against which current prices are compared. 3
In sum, Nigeria’s inflation profile in April 2025 reflects a cautious easing that offers some optimism but underscores the need for continued vigilance in monetary and fiscal policy to maintain disinflation momentum without undermining growth prospects.
Steady Naira, Steady Prices: CBN’s Balancing Act
The Naira remained relatively stable in April, aided by sustained CBN interventions in the FX market. Reduced volatility narrowed the spread between official and parallel market rates, helping cap imported inflation.
After earlier volatility, exchange markets saw fewer extreme swings and a narrower gap between official and parallel rates. Given the relative stability in the exchange rate and ongoing inflation concerns, the CBN is likely to maintain its current monetary policy stance in the upcoming MPC meeting. 2
Holding the policy rate steady would help sustain foreign portfolio investment inflows, which are sensitive to interest rate differentials and currency stability. This approach aligns with the CBN’s commitment to orthodox monetary policies aimed at price stability.
Fuel Prices Flat, Currency Risks Heat Up, Inflation Fingers Crossed
Nigeria saw no new fuel shocks in April compared to the Naira for crude swap shock between the Dangote Refinery and NNPCL. Also, during the month, Dangote Refinery reduced prices and sold at approximately ₦835/litre, below prevailing market rates , easing-
energy and transport costs. With fuel and energy as major inflation drivers, the absence of a price spike removed a key source of CPI volatility. 4
However, risks remain, with global oil prices trending lower and the naira holding firm, pump prices should stay flat or edge down. Domestic refining shields against import-linked costs. But if the naira weakens, marketers will have to pay more naira for each dollar of imported inputs, so they’ll raise pump prices which could lead to inflation inching up not because crude got more expensive but because of currency weakness.
On the other side, lower oil prices shrink government oil revenues. Given the budget’s heavy reliance on NNPC proceeds and crude exports, sustained low prices risk fiscal strain, which in turn could pressure the Central Bank of Nigeria to support the naira with limited foreignexchange reserves.
Petrol underpins transport, power generation, logistics, and food distribution. A rise in pump prices feeds directly into higher transport fares, logistics charges, market prices, and service costs fuelling higher inflation. If FX stability persists and domestic refining scales up, the current environment does not warrant a petrol-price hike.
CBN Faces Balancing Act Ahead of MPC: Rate Hold Expected
Given the easing of headline inflation but persistence of structural pressures particularly around food supply and currency risk, the MPC is likely to hold the policy rate at its May 2025 meeting. This stance supports disinflation while preserving investor confidence and helping attract portfolio flows.
Maintaining the current rate is crucial not only to continue tempering inflation but also to preserve the attractiveness of Nigeria’s fixed income market, especially foreign portfolio investments (FPI).
In a recent World Bank document, it was noted that Nigeria’s foreign exchange (FX) market turnover remains largely dominated by interventions from the Central Bank of Nigeria (CBN) and inflows from foreign portfolio investors (FPIs) and while overall FX turnover has improved following recent policy changes, the market is still heavily reliant on CBN interventions, often aimed at managing volatility and short-term foreign portfolio investment attracted by high yields and potential revaluation gains.5
With global oil prices trending lower, Nigeria faces reduced oil revenues, a critical source of fiscal financing and foreign exchange inflows. This shortfall could strain government finances and limit the Central Bank’s ability to defend the Naira, increasing devaluation risks. Any capital flight from FPIs in response to rate changes or external shocks could trigger exchange rate volatility. Such volatility would raise the cost of imported goods and services, driving inflation higher through exchange rate pass-through.
Given this context, the Central Bank holding rates steady would support ongoing disinflation while safeguarding economic growth and market confidence. However, with a positive real interest rate (with inflation below the MPR) offers some policy flexibility but a rate cut remains risky in the current environment. A modest rate cut could support credit growth in manufacturing and agriculture and reduce government debt costs. However, with rising external risks and fragile investor sentiment, premature easing could trigger capital flight, FX pressure, and renewed inflation, undermining recent stability gains.
Bottom line
The April 2025 inflation data reinforces the need for continued monetary vigilance and fiscal discipline. While disinflation continues, risks from FX volatility, fragile food supply, and fiscal strain remain elevated, requiring coordinated policy action.
Externally, the U.S. 14% tariff on Nigerian exports, including crude oil, threatens FX inflows. A weaker Naira could trigger imported inflation.
Domestically, food supply is vulnerable to planting constraints, weather shocks, and insecurity, with the onset of the rainy season likely to intensify pressures and drive food inflation higher in the coming months.
At its upcoming meeting, the MPC is expected to hold the MPR to retain foreign portfolio inflows, crucial for FX stability amid falling oil receipts. Sustaining high real yields is key to preserving investor confidence and naira stability. Given the stabilizing base effects, FX market management, and absence of immediate petrol price shocks, headline inflation in May 2025 is expected to decline marginally, but at a slower pace than in April.
