July 17, 2025/InvestmentOne Report

Nigeria s annual headline inflation rate eased for the third consecutive month in May 2025 to 22.22%, largely driven by statistical base effect and a relatively stable exchange rate. However, underlying inflationary pressures persisted as the annual food (+0.83% to 21.97%) and core (+0.48% to 22.76%) inflation rates both increased during the month. On a monthly basis, headline inflation rose by 15bps to 1.68%, driven by consumer price pressure in both food and core index which increased by 107bps and 136bps respectively to 3.25% and 2.46%. Although recent annual headline inflation prints seem to be on a downward path, underlying cost pressures remain elevated.

Looking ahead, we expect the high base from the previous year to continue to support the disinflationary process, especially the headline inflation rate. Meanwhile, the monthly readings should provide a more reflective picture of current consumer price trends. We also consider the impact of the series of PMS price reduction implemented by the Dangote Refinery this month, we therefore envisage further declines in energy prices, as seen in the previous two months.

Additionally, Dangote Refinery s planned nationwide distribution of PMS and diesel, which is slated to begin around August 15, 2025, and includes free logistics and credit facilities aimed at lowering distribution costs and stabilizing fuel prices should taper inflation looking further into the year. Based on our current projections, we anticipate headline inflation to end the year in the 19.00% 21.00% range. Next week, the monetary policy committee of CBN will hold its monetary policy, we expect the benchmark interest rates to be left unchanged at the current level of 27.50%.

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