In a few days, Nigeria’s inflation numbers will be released. Based on our market survey and econometric model, inflation is expected to ease to 22.65% in June, from 22.97%. This forecast is driven by a combination of factors, including a ₦100 reduction in PMS price, relative stability in the naira exchange rate, and a decline in money supply growth.

Food Inflation to Rise Marginally

Inspite of the trend, food inflation is expected to rise by 0.42% to 21.56% from 21.14%. Core inflation (inflation less seasonalities), is projected to decline by 1.34% to 20.94% from 22.28%.

Month-on-month inflation, which is a more recent reflection of price movements, is projected to rise by 0.46% to 1.99% in June (annualised at 26.75%) from 1.53%. The increase in monthly inflation is driven mainly by transient factors, including seasonal effects, flash floods in Mokwa – a key link between northern food-producing states and southern consuming states, and a possible decline in food imports following the expiration of import waivers. The inflation numbers could have been worse if not for the relative stability of the exchange rate.

MPC is Likely to Opt for a 25bps Rate Cut

The Monetary Policy Committee (MPC) will meet on July 21-22. In view of the current moderation in the inflation rate and exchange rate stability, a marginal reduction in the MPR by 25pbs appears to be the most likely outcome. This easing in the interest rate is reinforced by the latest forecast from the IMF, which anticipates inflation will decline in Q4’25 and further ease to18% in 2026. Additionally, in the primary treasury bills market, the Debt Management Office (DMO) recently reduced the stop rate of 365-day to 16.76%p.a., down from 17.12%p.a. in June this year.

The wider implication of a fall in MPR is that it will reduce the borrowing cost of small businesses.

In the download and link, the FDC Think Tank shares its estimates for June inflation and likely policy reactions.

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