August 13, 2025/Coronation Report
Summary
Ahead of the July inflation data release on Friday, we expect the disinflationary trend to persist, with the headline inflation rate easing to 21.52% y/y down from 22.22% y/y in June. Meanwhile, on month-on-month basis, we anticipate a mild uptick in headline inflation to 1.80%, as persistent inflationary pressure in core component-ICT and transport are likely to outweigh the pace of moderation in food inflation.
Key Drivers
Our inflation projection for July 2025 is underpinned by four key factors. Firstly, the passthrough effect of the CBN’s FX policy reforms continue to support Naira stability. Although, July recorded a marginal depreciation in the Naira against US Dollars of 0.46% compared to 3.02% appreciation in June 2025, closing at ₦1,534/USD. Secondly, domestic energy costs eased as petrol prices fell below ₦900/litre, however increased logistics (transport activities) partially offset the decline. Thirdly, we observed a slight decline on some farm produce prices on the back of early harvests in some food producing regions. Lastly, favorable base effects continue to act as key disinflationary catalyst, sustaining the downward trajectory in headline CPI at least on a year on year basis.
Outlook for August
The inflation outlook for August points to a potential moderation, supported by continued foreign exchange stability and a slight easing in food prices from the ongoing early harvest season. If the current FX stability persists and early harvest gains are sustained, headline inflation could remain broadly in line with July’s level. However, risks to this outlook include a sharp depreciation of the naira from external shocks, an increase in fuel prices from potential global geo-political risks, and upward pressure on food prices stemming from recent flooding in Nigeria, which has impacted farmlands and disrupted transportational nodes needed for logistics. These factors could reverse the current disinflationary trend and move inflation above 22% y/y or limit the pace of moderation relative to the previous month.
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