Structural Bottlenecks Could Derail Nigeria’s Disinflation Path, Says CPPE

Nigeria’s inflation rate eased further to 15.15 per cent in December 2025, extending a disinflation trend that has persisted over the past year, according to a policy brief released by the Centre for the Promotion of Private Enterprise (CPPE).

The moderation, driven largely by declining food prices, has provided some relief to households grappling with high living costs, but CPPE warned that deep-seated structural challenges continue to threaten the durability of the gains.

The CPPE noted that month-on-month inflation slowed sharply to 0.54 per cent in December from 1.22 per cent in November, reflecting a broad deceleration in price pressures.

Food inflation fell to 10.84 per cent, with food prices recording a marginal month-on-month deflation, marking the most significant contributor to the easing of headline inflation during the period.

However, the private sector think tank cautioned that recent changes to the methodology used in computing the Consumer Price Index have raised concerns about the credibility and consistency of the inflation data.

While CPPE acknowledged that the adjustments had not materially altered the downward inflation trend observed over the past 12 months, it said the perception of weakened data integrity could undermine confidence among investors, businesses, analysts and policymakers.

According to the report, the apparent improvement in headline inflation contrasts with developments in core inflation, which rose to 18.63 per cent in December from 18.04 per cent in November.

CPPE described the increase as a key concern, noting that it appears inconsistent with exchange-rate stability and other macroeconomic indicators, and may point to persistent structural pressures or possible statistical distortions.

The organisation observed that inflationary pressure in Nigeria remains highly concentrated in a few critical sectors, notably food and beverages, housing and utilities, restaurants, transportation and fuel.

Together, these categories account for about 72 per cent of overall inflation pressure, reflecting spending patterns where households allocate the bulk of their income.
Despite the moderation in headline inflation, CPPE stressed that the underlying drivers of high costs remain firmly in place.

Elevated energy and fuel prices, rising transportation and logistics expenses, insecurity affecting agricultural production, high interest rates and the cost of credit, as well as import duties on key production inputs, continue to exert upward pressure on prices and limit the scope for sustained disinflation.

The sharp decline in food prices, while beneficial to consumers, has also introduced a new policy dilemma.

CPPE warned that falling farm-gate prices amid rising input costs are eroding farmers’ returns, potentially discouraging investment in agriculture and posing longer-term risks to food security.

Balancing affordability for consumers with investment viability for producers has therefore become an urgent policy priority.

The think tank welcomed indications by the Coordinating Minister for the Economy, Mr Wale Edun, that the government is taking steps to address this challenge.

It emphasised that targeted measures to reduce the cost of fertilisers, agrochemicals and farm machinery, expand irrigation and mechanisation, and introduce minimum guaranteed pricing for staple crops would help restore confidence among farmers while preserving recent affordability gains for households.

CPPE also underscored the importance of stronger coordination between fiscal and monetary authorities, arguing that structural interventions must complement monetary tightening to bring inflation down sustainably without undermining production and growth.

In its recommendations, the organisation urged the government to intensify efforts to reduce the cost of food, transportation and utilities, tackle insecurity to boost agricultural supply, lower input costs for farmers and reduce import duties on manufacturing inputs.

It also called on the National Bureau of Statistics to strengthen institutional capacity, improve analytical rigour in CPI computation and rebuild public and investor confidence in official inflation data.

The CPPE concluded that while the December 2025 inflation figures confirm that Nigeria’s inflation is moderating, largely on the back of food price declines, sustaining the progress will require decisive action to address structural bottlenecks, support agricultural producers and restore trust in economic data.

Without such measures, it warned, the recent gains in affordability and price stability may prove difficult to maintain.