…Experts urge “caution”
Beneath the volatility of headline inflation, Nigeria’s underlying price pressures are cooling. Core inflation, which excludes volatile food and energy costs, has trended downward from 2023 into early 2026, according to the National Bureau of Statistics (NBS). The shift gives policymakers a clearer view of sustained cost dynamics and a stronger basis for a possible rate cut.
At the end of 2023, the core rate remained elevated, reflecting persistent cost pressures across services and non-food sectors. By late 2024, it hovered near the high twenties, with monthly readings pointing to structural drivers. Through 2025, the annual rate eased markedly.
In August 2025, core inflation stood at 20.33 percent, down sharply from nearly 27.6 percent a year earlier. By November, it had fallen to 18.04 percent. In January 2026, the rate declined further to 17.72 percent, compared with 25.27 percent in January 2025. The trend shows steady disinflation in non-food and non-energy items.
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The shift from 20.33 percent toward 17.72 percent reflects supply-side adjustments, statistical rebasing of the Consumer Price Index, and slower price growth in services and non-food goods.
Still, easing does not automatically justify aggressive monetary action.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), expects caution. “It is very likely that the CBN will continue to adopt a very cautious position with respect to rate cut or monetary easing at this time. First, at over 17 percent core inflation is still elevated, yes food inflation is at single digit now 8.89. But the core inflation is double, which shows that we are still dealing with major factors that are driving costs, especially factors that are structural in nature.
“In addition, the CBN has been cautious or worried about the pre-election spending. 2026 is likely to see significant political activities, campaigns and all manner of expenditure; this may also have some significant liquidity effects. When you look at all of these together, one may not expect any immediate decision to cut rates. What I am expecting is that the CBN may adopt a cautious position and may want to continue to hold on the rate for now.”
Yusuf’s concern reflects broader worries that election-related spending could inject liquidity and complicate inflation management.
For the Central Bank of Nigeria, core trends matter more than headline swings. Headline inflation captures volatile items like food and transport, but core readings reveal pressures shaping wages, contracts, and business planning. Data suggest these pressures are moderating durably.
The trend already influenced policy. In September 2025, the CBN cut its benchmark interest rate for the first time in years, citing disinflation as justification for a more accommodative stance.
Further declines would give the bank latitude to adjust borrowing costs gradually without reigniting entrenched price pressures. The direction will hinge on how policymakers balance growth ambitions against stability.
Pat Utomi, professor of economics, emphasizes the bank’s internal view. “The perspective of CBN will determine if the rate will be cut or not. Are they bullish on growth, do they realise the need for growth, for job creation, if they do.
Then, the next question is where that growth will come from. Does industrial policy facilitate regional interest rate capital easier for certain sectors? I know traditional arguments targeting certain sectors, but it is what the CBN wants first that will determine if the rate is to be cut or not.”
Oyekan Idris, a capital market analyst, sees room for easing but urges vigilance. “Though macros are supportive of a rate cut, CBN must tighten monitors as pre-election spending might cause some inflationary pressure.”
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Easing core inflation sharpens fiscal policy space. Lower underlying inflation suggests structural imbalances may be softening, enabling targeted investment in productivity or infrastructure without fueling prices.
Quadri Faruk, economist at SPEC-MATRIX, highlights survey sentiment. “The CBN survey highlights a clear tilt toward looser monetary conditions. About 50.1 percent of respondents said they would prefer lower rates even if inflation accelerates, compared with 41.8 percent who support raising rates. Nonetheless, inflation fears remain significant, with 66.6 percent stating faster price growth would weaken the economy. Consumer sentiment stayed positive for the third consecutive month in January, though it moderated to 2.8 points from 4.8 in December.
Households continue to prioritise essential spending, particularly on food, while demand for big-ticket items remains subdued, reflecting cautious discretionary spending.”
For households and firms, moderating core inflation implies slower increases in recurring costs such as rents, services, and transport. While food and energy remain challenging, steadier core prices allow better planning.
Abdussalam Sheriff, corporate finance analyst, notes the current stance may already be restrictive.
“The current restrictive stance, MPR at 27.0 percent since late 2025, has successfully anchored expectations but now risks stifling growth, with CBN projecting 4.49 percent GDP expansion for 2026. A modest rate cut of 50 to 100 basis points to 26.0 to 26.5 percent would lower borrowing costs, spurring credit to key sectors like manufacturing and infrastructure without reigniting inflation pass-through.
A 100-basis points pivot would align with the CBN’s 12.94 percent average inflation forecast for the year. I would not be startled if they hold a neutral stance, especially given that it is the first meeting this year.”
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The decline from the mid-20s to high teens marks a meaningful shift beneath headline volatility. For policymakers, it expands the scope for calibrated monetary and fiscal action. The question is not whether inflation has eased, but whether the disinflation is durable enough to justify a shift without reigniting structural pressures.