Access Bank
Naira Stability Drives Inflation Down to 21.3%, Says Access Bank
Olarinde Idowu
Nigeria is experiencing a continued slowdown in its headline inflation for the fifth month in a row, offering a sign of tentative relief. This moderation is attributed to the Central Bank’s strict monetary policies and a recent period of stability for the national currency, the naira, which are now influencing consumer prices.
According to forecasts from Access Bank’s Economic Intelligence Unit (EIU), the annual inflation rate is expected to drop to 21.30 per cent in August, down from 21.88 per cent the previous month. This continues a trend that began after inflation peaked above 22 per cent in the spring, aided by a stronger naira, the arrival of early food harvests, and a decline in global energy costs.
While the annual rate is falling, prices are still rising each month. The Consumer Price Index is projected to increase slightly from July to August. Analysts point to a combination of factors behind this disinflationary momentum, including monetary restraint, steadier foreign exchange markets, and better coordination among the country’s economic policymakers. The EIU noted that these elements have strengthened the foundation for price stability.
The naira’s value held relatively steady against the dollar in July, a sign of improved foreign exchange liquidity. This stability, coupled with higher real returns on investments, also led to a significant monthly increase in foreign portfolio investment within the stock market.
The latest official data from July already showed inflation easing, driven largely by lower gasoline prices and the stronger currency. A particularly sharp decline was seen in food inflation, a critical issue in Nigeria, due to lower prices for staples like oil, beans, and grains. Core inflation, which excludes volatile food and energy prices, also moderated.
This improving trend is making naira assets more attractive to investors, helping to sustain foreign capital inflows. Furthermore, Nigeria’s economy possesses a structural advantage: its heavy reliance on oil and gas exports results in one of the world’s lowest effective tariff rates, insulating it from many global trade shocks.
Looking forward, the path of inflation will depend on the central bank’s ability to maintain the naira’s stability. There is already growing investor interest in local bonds, encouraged by the improving economic outlook. The government aims to build on this progress through its medium-term development plans, targeting ambitious economic growth driven by reforms in key sectors like energy and infrastructure.
