Nigeria Yields Set to Drop as Inflation Retreats to 18% on Food Price Relief

Nigeria inflation continued its downwards march as headline numbers for September 2025 eased to 18.08% from 20.12% in August, according to a report by the National bureau of Statistics (NBS).

The decline was largely driven by a 1.6% Month-on-Month (MoM) decline in food inflation, reflecting improved food supply from the ongoing harvest.

Food Inflation fell steeply to 16.87% from 21.87% a month earlier, while core inflation (less food and energy) printed at 19.53% in September, compared to 20.33% in August.

Interestingly, such a drop in MoM food inflation during September is atypical in recent years but was relatively common between 1996 and 2005, a period marked by greater food security.

This outsized food inflation decline may have been partly prompted by the recent material drop in market food prices and easing security concerns.

What moderating inflation means for the market

• With the drop in inflation, fixed income yields are expected to adjust lower while the Central Bank of Nigeria (CBN) rate easing cycle should continue.
• The softer inflation outlook reinforces the case for additional monetary easing by the CBN at its November policy meeting. Analysts expect a 100 basis points (bps) reduction in the monetary policy rate (MPR) to 26.0%.
• The ongoing disinflationary trends bode well for currency valuation. Combined with a sustained current account surplus and a steady build-up in FX reserves, this is expected to underpin further Naira appreciation. Cardinal Stone Partners analysts project FX to close the year within the range of N1,400.00/$-N1,450.00/$.
• While the yield curve may remain inverted, expect a sharper adjustment at the short end of the curve.

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