The National Bureau of Statistics reported a slight moderation in headline inflation to 15.06% y/y in February (January: 15.15% y/y). The decline reflects a slowdown in core inflation to 15.88% y/y (January: 17.72% y/y), which was partly offset by an uptick in food inflation to 12.12% y/y (January: 8.89% y/y).
On a month-on-month basis, consumer prices edged higher by 2.01% in February (January: -2.88% m/m), marking a sharp reversal from the prior month’s decline.
On a month-on-month basis, the food index rebounded sharply, rising by 4.69% m/m (January: -6.02% m/m), which pushed the year-on-year rate higher to 12.12% y/y (January: 8.89% y/y). We attribute this sharp uptick largely to a significant increase in farm produce prices, which rose by 3.74% m/m (January: -5.10% m/m), reflecting tighter supply conditions during the ongoing planting season.
Meanwhile, imported food rose at a relatively moderate pace at 0.65% m/m (January: -6.81% m/m), primarily reflecting a stable exchange rate.
Elsewhere, the core index rose by 0.89% m/m (January: -1.69% m/m), with the y/y inflation rate settling lower at 15.88% (January: 17.72% y/y). Across the subcomponents, prices rose in restaurants and accommodation services (+1.12% m/m vs January: -0.08% m/m), recreation, sport and culture (+0.81% m/m vs January: –7.17% m/m) and furnishings, household equipment and routine household maintenance (+0.81% m/m vs January: -0.02% m/m).
However, prices slowed in clothing and footwear (-0.70% m/m vs January: +0.73% m/m), utilities (-0.45% m/m vs January: +0.52% m/m), and transport (-0.26% m/m vs January: -1.02% m/m) sub-items.
Energy Costs and Festive Demand Set to Raise Price Pressures
We expect price pressures to strengthen in the near term, mainly driven by higher energy costs, festive demand, and persistently tight supply of farm produce.
First, the recent surge in global crude oil prices, triggered by supply disruptions stemming from the US–Iran conflict, is already feeding through to domestic fuel prices. Despite improved local refining activity, feedstock costs remain closely linked to international crude oil benchmarks. Brent crude prices have risen by over 36.1% since the conflict began on 28 February, reaching a high of USD104.07/barrel.
This increase has led to sharp adjustments in domestic fuel prices, with PMS rising to NGN1,175.00/litre (from NGN774.00/litre on 28 February) and diesel rising to NGN1,620.00/litre (from NGN1,020.00/litre). Consequently, we expect higher fuel costs to raise transportation and operational expenses, with second order impact on food and broader consumer prices as inflation expectations rise.
Secondly, the Eid al-Fitr celebrations are likely to stimulate household spending on food, transportation, clothing, and other discretionary items, generating additional seasonal demand-pull pressure on prices during the period.
In addition, the supply of farm produce is expected to remain tight as the planting season approaches its peak in April, which typically constrains supply and puts upward pressure on food prices.
Overall, we forecast headline inflation to rise to 3.50% month-on-month in March (from 2.01% m/m in February). While the combination of cost-push and demand-pull factors is expected to keep price pressures elevated in the near term, a high base effect from March 2025 (+3.90% m/m) should moderate the year-on-year inflation rate to around 14.62%.
Cordros
