Dear Subscriber,

Nigeria’s headline inflation rebounds, rate cut hopes fade

Nigeria’s headline inflation rose in March for the first time in three months, dashing hopes for a possible rate cut in May.

Headline inflation climbed to 24.23% from 23.18% in February, while monthly inflation surged to 3.9%.

Key drivers included rising food prices, higher petrol costs (₦860 to ₦935/litre), a weaker naira (₦1,492/$ to ₦1,600/$), and a 50% hike in telco tariffs. Despite a slight drop in annual food inflation to 21.79%, monthly food inflation rose due to seasonal factors and high logistics costs. The drop in food inflation was partly due to the reduction of the weight of food in the new basket from 51.8% to 40%.

Core inflation also accelerated to 24.43% year-on-year. Rising housing, energy, and infrastructure deficits continue to fuel structural inflation.

Globally, the US-China tariff war and “Trumpnomics” have disrupted supply chains, pushing input costs higher. Falling crude oil prices may ease logistics costs but threaten Nigeria’s export earnings, which affect foreign reserves and the exchange rate.

Our analysis shows a 92% correlation between petrol prices and inflation, and 90% between exchange rate and inflation. Every 1% increase in petrol price could lead a 0.018% rise in inflation. A 1% depreciation in the exchange rate will cause a 0.12% increase in inflation.

Given rising inflation and global uncertainty, the possibility of a rate cut by the CBN at the May MPC meeting is becoming more remote.

In the download and link below, the FDC Think Tank shares its thoughts on the impact of March’s inflation numbers on the economy.

Enjoy your read…