Inflation in October 2025 declined for the seventh straight month, moderating to 16.05% from 18.02% in September, a decline of 1.97%. Food inflation fell to 13.12% from 16.87%, a decline of 3.75%. Core inflation declined to 18.69% from 19.53%, a decline of 0.84%. The sustained decline signals firmer price stability, reduced cost pressures, and improving macroeconomic conditions in Nigeria.
https://www.digital.zenithbank.com/ZEQ/ZEQ-jan-2026/index.html#p=1With stronger macro indicators, recent rating actions reinforce the momentum. In October, Fitch affirmed Nigeria’s ‘B’ rating with a Stable Outlook, while S&P maintained its ‘B-’ rating and shifted the outlook to Positive. The reforms earlier introduced in 2023 and 2024, are now entering their payoff phase in 2025. The initial costs were steep, but much of the adjustment has now been absorbed, and Nigeria’s macro environment shows clearer stability.
Disinflation Strengthens Despite Temporary Energy Shocks
Month-on-month however tells a slight difference in story. On a month-on-month basis, headline inflation rose slightly to 0.93% from 0.72% in September, a 0.2% increase. Food inflation also improved to -0.37% from -1.57%, an increase of 1.20%, although the food inflation print was still in deflationary territory. Core inflation for the month remained flat at 1.42%.
The uptick in the M-o-M headline and food inflation can be attributed to the effect of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) strike disrupting the supply of fuel and gas and delayed maintenance operations at the NLNG
Train 4 facility. This created supply shortages that triggered sharp increases in gas prices and a slight uptick in fuel prices, which eventually fed into food prices as it affected transportation and other essential services. While the fuel price uptick was minimal, the largely unregulated nature of the domestic gas market meant that limited availability quickly translated into significantly higher retail prices. This shock was transmitted to food inflation and, subsequently, to headline inflation, even as core inflation held steady. However, prices have now largely normalized, indicating the temporary nature of this.
The stability in core inflation points to contained price pressures in non-volatile items and remains consistent with the ongoing disinflation path.
Nigeria’s disinflation has been notable for its steady pattern. Headline inflation has continued to decline, and although part of the movement reflects base effects, the improvement in month-on-month inflation shows that underlying price pressure is easing.
The proposed 15% import duty on petrol and diesel, though now suspended, was designed to support Nigeria’s energy strategy by encouraging local refining and reducing dependence on imported fuel over the medium to long term. In practice, however, it would have functioned as a protectionist measure, pushing domestic fuel prices higher by allowing local suppliers to raise prices while remaining cheaper than imported products. Its suspension has removed a near-term upside risk to energy costs and, by extension, food prices, helping to safeguard the disinflation gains achieved so far.
Naira Appreciation Supported by FX Inflows but Facing Near-Term Risks
Feeding into the disinflation trend, the naira performed well in October, appreciating 2.3% against the dollar and closing at ₦1,421 from an opening level of ₦1,455. This has helped to stabilise the cost of imports and, by extension, the prices of goods and services.
October marks the sixth month this year in which the naira appreciated. The currency’s strength reflects higher foreign exchange inflows supported by increased oil output and rising foreign portfolio investment, helped by firmer macro conditions and recent rating actions. However, with the introduction of a capital gains tax scheduled for January 2026, capital flights are likely as investors seek to realise profits before the effective date, although it has been mentioned that there might be a review. We expect only a minimal effect on the exchange rate, as Nigeria remains an attractive investment destination.
The sustainability of the exchange rate going forward will depend largely on foreign exchange inflows, particularly from exports and the oil sector. Nigeria has continued to implement policies aimed at boosting oil production, which is especially important in a year
when global oil prices have generally been bearish; higher volumes are needed to offset the impact of weaker prices. According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s total daily production (BOPD) has improved this year but has started to decline in the months of August and September 2025.
Also, the improvement in Nigeria’s macro and credit environment is expected to continue to attract Foreign Portfolio Investment (FPI) and, over time, stronger Foreign Direct Investment (FDI), given the attractive returns and high-interest-rate environment. These flows are expected to further strengthen external reserves and provide additional support to the naira.
Ahead of the MPC: Key Expectations
The MPC is scheduled to hold its 303rd meeting on the 24th and 25th of November 2025. Given the significant improvement in inflation and the relative stability of the exchange rate, we anticipate that the Committee will implement a 100-basis point rate cut, which would mark the second rate cut this year. This projection is supported by the clear disinflation trend and continued exchange rate stability.
Looking Ahead: What to Expect from Inflation
Looking ahead, inflation in November is expected to continue its downward trend. Stable prices in fuel, energy, and transportation, combined with the ongoing harvest season, are helping ease food costs. Core inflation is likely to remain contained, reflecting stability in nonvolatile items. The base effect will also support further disinflation. November and December 2024
recorded some of last year’s highest inflation rates, creating a favourable comparison that should keep headline year-on-year inflation on a declining path.
The suspension of the proposed 15% tariff on petrol and diesel removes a key near-term risk to energy prices, reducing the likelihood of sudden upward pressure on fuel costs. Global oil prices remain broadly steady, limiting any negative impact on Nigeria’s oil revenue, foreign reserves, or exchange rate.
As the festive season approaches and the harvest period ends, seasonal price pressures may increase. However, the base effect is likely to offset these pressures, allowing inflation to stay on a downward path. With stable energy prices, easing food costs, a favourable base effect, and a steady FX environment, inflation is expected to continue moderating, approaching our year-end estimate of 15% for 2025.
Bottom Line
The October inflation data confirms that Nigeria’s disinflation remains firmly on track. Headline, food and core inflation all declined year on year to 16.05%, 13.12% and 18.69% respectively, while month-on-month readings show only a mild uptick in headline and food inflation, largely driven by temporary fuel and gas disruptions rather than a renewed, broadbased price surge. Core inflation stayed flat at 1.42% month on month, underscoring contained underlying pressures in non-volatile items. Together with a stronger naira,improving reserves, and supportive sovereign rating actions from Fitch and S&P, these dynamics point to a gradually improving macro backdrop and rising investor confidence.
Looking ahead, stable energy prices, the harvest-driven easing in food costs, and a favourable base effect from last year’s elevated November–December prints should allow disinflation to continue through year end. The suspension of the proposed 15% fuel import tariff has removed a key near-term upside risk to inflation, while FX inflows and policy reforms remain broadly supportive.
