Inflation in Nigeria: A Descriptive Analysis of Recent Developments

Selected Issues Papers, June 17, 2026

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Title: Inflation in Nigeria: A Descriptive Analysis of Recent Developments
Authors: Reginald Darius, Cecilia Melo Fernandes, Chris Stumphius
Date: June 17, 2026
Core summary: Recent reforms have reduced inflation persistence and improved the economy's responsiveness to monetary policy. The paper documents the dominant contribution of food to headline inflation, the rising importance of transport, housing, and exchange rate-sensitive components, and the effects of the 2025 rebasing exercise. It analyzes the decline in inflation persistence since the 2023 exchange rate reform and discusses policy implications for sustaining durable disinflation amid global commodity price shocks.

Inflation persistence in Nigeria has declined following recent reforms.
The economy's responsiveness to monetary policy actions is improving.
Historically, inflation drivers included:
- food prices,
- supply-side shocks,
- deficit financing,
- episodes of pronounced exchange rate depreciation (notably in 2016 and after the 2023 unification of foreign exchange windows).
Diffusion indicators and survey-based measures show initial signs of a tentative re-anchoring of expectations and a moderation in headline inflation.
The breadth of inflationary pressures is gradually easing as tighter monetary policy and greater exchange rate stability take hold.
Rising importance of non-food components: transport, housing, and exchange rate-sensitive components are increasingly contributing to inflation.
The 2025 rebasing exercise has measurable effects on inflation statistics (documented in the paper).

Food inflation: dominant contributor to headline inflation across the documented period.
Exchange rate episodes: pronounced depreciation in 2016 and after the 2023 unification of foreign exchange windows were key inflationary episodes.
Supply-side shocks and deficit financing historically amplified inflation dynamics.

2023 exchange rate reform (unification of foreign exchange windows):
- Associated with a decline in inflation persistence.
- Helped break entrenched inflation patterns and reduce the impact of past drivers.
Tighter monetary policy:
- Contributing to moderation in headline inflation.
- Enhancing the re-anchoring of inflation expectations as suggested by survey-based measures.

The paper documents the effects of the 2025 rebasing exercise on inflation measurement and dynamics (details and quantitative effects are presented in the full paper).

Inflation persistence has declined since the 2023 exchange rate reform.
Improved monetary policy transmission suggests policy can more effectively anchor inflation expectations.
Policy implications discussed focus on sustaining durable disinflation, particularly in the context of recent global commodity price shocks.

Sustain tighter monetary policy to consolidate disinflation and re-anchor expectations.
Maintain exchange rate stability to prevent episodic depreciation-driven inflation spikes.
Monitor evolving contribution of transport, housing, and exchange rate-sensitive components to inflation.
Account for the statistical and policy implications of the 2025 rebasing exercise.
Remain vigilant to global commodity price shocks and their passthrough to domestic inflation.