The July 2025 inflation data showed positive signs of easing, with headline and core inflation(year-on-year) both reducing, alongside month-on-month declines in food and core inflation. This points to slower price growth and greater stability, especially as core inflation, which excludes volatile items like energy and food, fell yearly and monthly. However, headline inflation (month-on-month) and food inflation (year-on-year) both inched higher.
Headline inflation (year-on-year) continued its decline, to 21.88% from 22.22% in June, a0.34% decline. Core inflation also dropped to 21.33% from 22.76% in June, a 1.43% decline. In contrast, food inflation rose to 22.74% from 21.97% in June, an increase of 0.77%.
Month-on-month, headline inflation increased by 0.31% to 1.99% from 1.68% in June. Food inflation declined by 0.13% to 3.12% from 3.25% in June, while core inflation posted a significant drop to 0.97%, down from 2.46% in June 2025.
Fueling the Divide
The year-on-year decline in headline inflation for July 2025 is partly attributable to base effects, as 2024 recorded elevated inflation levels. Following the rebasing, headline inflation has trended downward in most months, with the only exception being March 2025, which registered a marginal uptick. However, the month-on-month (MoM) dynamics reveal a more complex picture. Inflation in July 2025 stood at 1.99% MoM compared to 2.28% in July 2024, indicating that the moderation in headline inflation cannot be explained by base effects alone. This points to a gradual improvement in underlying price stability.
In July 2025, headline inflation rose on a MoM basis, while both core and food inflation declined. This divergence reflects the impact of higher energy costs, which are excluded from both core and food inflation measures. Data from the National Bureau of Statistics (NBS)show that the energy inflation index rose 2.7% MoM in July 2025, reversing the -11%recorded in June. This sharp rebound in energy prices fed directly into MoM inflation, offsetting the disinflationary momentum from core and food inflation.
Core inflation posted a significant year-on-year decline of 1.43% and a month-on-month decline of 1.49%, underscoring the easing of underlying inflationary pressures. As core inflation excludes volatile items such as food and energy, its sustained moderation indicates that structural cost pressures such as input prices, supply chain constraints, and domestic demand imbalances are beginning to ease. This trend supports a more stable macroeconomic environment and suggests that the current disinflation is not purely cyclical but anchored in improving fundamental cost dynamics.
Exchange Rate Stability Anchors Prices
Nigeria’s exchange rate has also been very stable in July, helping to keep the prices of goodssteady, as the exchange rate declined marginally by 0.27% for the month.
Security Woes and Seasonality Keep Food Prices Elevated
Food inflation, which has remained one of the major concerns of the Monetary Policy Committee, increased year-on-year. Earlier this year, food inflation was showing signs of easing, and in February, the rate was below core and headline inflation, indicating that food prices were easing faster than both core and headline inflation. However, in June 2025, food inflation rose, and this pattern continued in July 2025.
Food & Non-Alcoholic Beverages contributed 8.75% to headline inflation in July, a slight reduction from 8.89% recorded in June 2025. This contribution was significantly higher than that of other basket items, with the total contribution from all divisions standing at 21.88%.The decline in contribution from food indicates that food inflation is slowing, but at a very gradual pace.
The uptick in food inflation in July can be linked to both security and seasonal factors. Insecurity in key food-producing states disrupted supply flows, with non-state armed groups restricting farming activities in Yobe State, inter-communal clashes reported in Niger State and heightened armed attacks in Plateau State. These disruptions reduced market supply, exerting upward pressure on prices.
Seasonal dynamics also played a role. June and July coincide with Nigeria’s lean season, when food stocks are low, and prices typically peak ahead of the main harvest. With the harvest season expected from August to October, we expect price pressures to likely ease as fresh supply enters the market. However, persistent security challenges in major food belts remain a structural risk that could limit the extent of the seasonal relief.
Inflation Trend Going forward: What to expect
Headline inflation is expected to continue its downward trajectory, driven mainly by the base effect and the positive signs seen in the July month-on-month core and food inflation data, which indicate that inflation is declining.
The exchange rate stability is expected to continue going forward, with either marginal appreciation or depreciation, as the naira is at a competitive level. With this stability, prices are also expected to remain relatively stable, helping to limit additional inflationary pressures.
However, the introduction of the 4% Free on Board(FoB) charge in August, replacing the 1%Comprehensive Import Supervision Scheme (CISS) and 7% port surcharge, inflationary pressures are expected to increase inflationary pressures across the board, affecting both core and food inflation. The new charge increases the landing cost of goods at the ports, and this higher cost could eventually pass down to consumers through higher prices. On the flip side, the increase discourages imports, which can help support naira stability.
Looking ahead, the ongoing proposed hike in licensing fees for customs agents and freight forwarders, though not yet implemented, is expected to further increase costs in the supply chain as agents pass these costs on to their principals. These higher operational costs would inevitably add another layer of upward pressure on inflation, especially to core inflation.
Food inflation is expected to decline going forward as Nigeria moves into the harvest season. During this period, existing food stocks are sold off to make room for newly harvested produce, while the harvest increases market supply, helping drive down prices. This is expected to bring relief to overall inflation, as the drop in food prices, which carry significant weight in the CPI basket, will help reduce headline inflation in the economy. In addition, the recent government intervention to lower food prices through the importation of certain items that are cheaper to import than produce locally is expected to further drive down food prices in the coming months.
Bottom Line
The July inflation data points to easing price pressures, with headline and core inflation falling year-on-year and month-on-month core and food inflation also declining. Stable exchange rates and the onset of the harvest season are expected to support further disinflation, as increased food supply and seasonal price moderation feed into headline inflation. However, persistent year-on-year food inflation reflects ongoing supply and security challenges, particularly in food-producing states. The Policy-driven cost increases of the new4% FoB charge introduced in August and the proposed customs licensing fee hikes, risk adding renewed upward pressure, especially on core inflation. Sustained disinflation will require careful sequencing of reforms, targeted interventions in food supply chains, and security improvements in agricultural regions to ensure that short-term gains translate into lasting stability.
