Analysts remain split on the trajectory of headline inflation, reflecting ongoing macroeconomic uncertainties as the National Bureau of Statistics (NBS) prepares to release the Consumer Price Index (CPI) for April 2025.
Some analysts are optimistic, anticipating a decline in inflation due to the statistical base effects from April 2024, which was a peak period for inflation.
In contrast, others warn that persistent structural challenges, particularly rising energy costs and a depreciating naira, could sustain inflationary pressures.
Nairametrics had previously highlighted that if energy prices continued to rise and the naira remained under pressure, there could be an uptick in inflation in April.
While both factors saw slight increases during the month, they did not escalate significantly enough to offset the statistical base-year effect. This suggests that inflation may not rise as sharply as some initially feared, with the base effect likely playing a more dominant role in moderating the year-on-year figures.
As experts wait for the NBS to release its data, the mixed expectations underscore the complexity of Nigeria’s inflation dynamics.
What experts are saying
Head of Research at Afrinvest West Africa, Damilare Asimiyu, in a telephone conversation, projected that headline inflation will ease to 23.6% year-on-year in April, a slight retreat from 24.23% recorded in March. According to him, the moderation is primarily driven by a favourable high base-year effect.
“April 2024 marked a significant inflationary peak. On a year-on-year basis, this will create a downward bias even if prices continue to trend upward on a monthly basis,” Asimiyu noted.
However, this optimism is tempered by other analysts who see room for further inflationary pressure.
Head of Investment Management at Norrenberger Asset Management, Victor Onyema, expects a slight uptick in inflation, forecasting that the headline rate could rise above March’s 24.23%. “We have seen persistent increases in energy and internet service costs, both major components of core inflation,” Onyema noted. “These elevated utility and communication expenses are eroding household purchasing power and pushing core inflation higher. Additionally, food prices have not seen any meaningful decline during the period under review, offering no meaningful relief.”
She added, “An absence of a downward trend in food inflation limits any potential relief on the headline number.”
Managing Director of Arthur Steven Asset Management, Olatunde Amolegbe, added a broader macroeconomic lens, pointing to external shocks as additional inflationary drivers. He noted that the volatile international environment, including a slump in oil prices and a weakened naira, continues to exert pressure on domestic inflation.
“The impact of global macroeconomic shifts like the tariff-induced trade slowdown has weakened the exchange rate, with its resultant impact on the prices of goods in Nigeria. Combined with the recent spike in the level of insecurities affecting food supply chains, this will reflect in the April numbers,” he stated. Amolegbe expects core inflation to increase by at least 50 basis points in April.
Key drivers of inflation for the month of April 2025
- Base-year effect
The high inflation level recorded in April 2024 could mechanically suppress the year-on-year figure for April 2025, providing a statistical reprieve even amid elevated prices.
- Rising cost of energy and internet services
Energy and internet service costs have continued to climb, pushing core inflation beyond the March print of 24.4% year-on-year in March, with signs of continued momentum.
- Higher food prices
Insecurity in key agricultural zones continues to disrupt supply chains, sustaining food inflation at elevated levels. Expectations of seasonal food price relief have so far failed to materialize.
- Exchange rate depreciation
The naira depreciated by 0.31% in April, moving from N1,537/$ to N1,602/$, with an intra-month low of N1,644/$. This currency weakness has amplified imported inflation, particularly in manufacturing and transport-related segments.
Looking ahead to May 2025
- FX Outlook: If the naira remains under pressure, imported inflation may remain sticky, undermining any statistical relief from base effects.
- Food Supply Dynamics: A sustained increase in local food production could offer some respite, but insecurity in the north and the Middle Belt continues to pose a significant risk to distribution and farm gate output.
- Monetary Policy Direction: Expectation on the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting scheduled in the coming week. A potential hike in the Monetary Policy Rate (MPR) could signal a tighter stance aimed at anchoring inflation expectations ahead of the mid-year cycle.
