15.39 Percent Inflation: August Data Gives CBN More Room to Reassess Rates

• Headline inflation eased marginally to 15.39 percent in August, but monthly inflation more than halved to 0.71 percent.

• Food inflation slowed sharply, with monthly food inflation falling to 1.02 percent from 5.56 percent in July.

• Core inflation turned negative at -0.06 percent, adding to the case for scrutiny of the CBN’s 26.5 percent policy rate.

September 16, () – Nigeria’s inflation picture changed more significantly in August than the headline figure of 15.39 percent suggests, with monthly price growth slowing sharply, core inflation turning negative and food inflation reversing the steep acceleration recorded in July.

The developments come ahead of the Central Bank of Nigeria’s September 21–22 Monetary Policy Committee meeting, putting greater focus on whether the latest data changes the balance between fighting inflation and maintaining tight monetary conditions.

The National Bureau of Statistics said headline inflation fell marginally from 15.43 percent in July to 15.39 percent in August, but the more immediate monthly measure showed a much sharper improvement.

Month-on-month headline inflation fell to 0.71 percent from 1.57 percent in July, a 0.86 percentage-point decline.

The CPI still rose by one point to 146.3, showing prices continued to rise even as the pace of increase slowed.

The bigger signal is in core and food inflation

Core inflation, which excludes volatile agricultural produce and energy, fell to 13.29 percent year-on-year from 14.97 percent in July.

More significantly, core inflation was -0.06 percent month-on-month in August, compared with 0.15 percent in July.

That suggests price pressures outside the most volatile components weakened during the month.

Food inflation also reversed July’s sharp acceleration. Annual food inflation declined to 19.57 percent from 20.31 percent, while the monthly rate plunged to 1.02 percent from 5.56 percent.

The monthly food rate therefore fell by 4.54 percentage points in one month.

This is particularly significant because July had threatened to disrupt the broader disinflation trend. Food inflation had jumped from 17.52 percent in June to 20.31 percent in July, even as headline inflation continued to decline.

Food and non-alcoholic beverages remained the largest contributor to annual headline inflation at 6.16 percentage points, followed by restaurants and accommodation services at 1.99 points, transport at 1.64 points and housing, water, electricity, gas and other fuels at 1.30 points.

But households are not yet seeing a full reversal

The moderation in the inflation rate does not mean prices have returned to previous levels.

Food prices were still rising 19.57 percent year-on-year in August, while the CPI increased to 146.3 points from 145.3 points in July.

Regional data also show ongoing pressure.

Urban inflation fell to 15.88 percent year-on-year from 16.12 percent, while rural inflation rose to 14.23 percent from 13.77 percent.

More strikingly, rural monthly inflation accelerated to 1.79 percent from 0.78 percent, while urban monthly inflation plunged to 0.28 percent from 1.90 percent.

There was also a wide divergence across states. Lagos recorded the highest annual headline inflation at 23.68 percent, followed by Zamfara at 22.56 percent and Enugu at 22.06 percent. Sokoto recorded 2.11 percent.

For food, Adamawa recorded 38.85 percent annual inflation, followed by Zamfara at 37.96 percent and Bayelsa at 36.20 percent.

The data therefore point to a more uneven inflation problem: national price growth is slowing, but food and regional price pressures remain elevated.

Why the August data matters for the MPC

The CBN last held the Monetary Policy Rate at 26.5 percent in July.

Since then, the inflation picture has improved further.

Beyond the 0.04 percentage-point decline in headline inflation, the more important changes are the 0.86 percentage-point fall in monthly headline inflation, the 4.54 percentage-point drop in monthly food inflation and the move in monthly core inflation to -0.06 per cent.

The CBN’s Inflation Expectations Survey also showed that 60.9 per cent of respondents wanted lower interest rates, while 27.4 percent preferred rates to remain unchanged and 11.7 percent wanted higher rates.

Meanwhile, Treasury-bill yields have been moving lower, with the 364-day NTB stop rate falling to 16.62 percent at the September 9 auction.

The August inflation report therefore gives policymakers a more favourable disinflation picture than the headline number alone indicates.

The question for the September MPC is no longer simply whether inflation is falling.

It is whether the latest slowdown is sufficiently broad and durable to justify a change in the monetary policy stance while food and regional price pressures remain uneven.