Nigeria’s inflation slows in third consecutive month to 22.22%

Nigeria’s headline inflation decelerated for a third consecutive month, slowing sharply to 22.22% in June, a figure that masks persistent price pressures on the ground and creates a complex policy dilemma for the central bank.

The significant drop from May’s 22.97% marks the slowest pace of price growth this year, the National Bureau of Statistics (NBS) reported Wednesday. However, the moderation offers what many analysts term a “paper-only” relief for households, as it appears to be driven more by favourable base effects and statistical timing than by a broad-based easing of economic hardship. Food inflation slightly increased to 21.97% in June compared to the previous month.

The official data stands in contrast to market realities. The NBS survey, typically conducted in the first half of the month, likely failed to capture the full inflationary impact of the Sallah festival, which saw livestock and commodity prices surge by an average of 35%. It also likely missed a brief spike in petrol prices that occurred late in the month, Norrenberger analysts wrote in a note.

This statistical slowdown hands the Monetary Policy Committee (MPC) a technical victory against inflation ahead of its July 21-22 meeting, but it is highly unlikely to trigger a dovish pivot. The consensus remains firm that the committee will hold the Monetary Policy Rate (MPR) at its record high of 27.50%.

Policymakers are expected to look past the headline number, prioritising the fragile stability of the naira and the necessity of maintaining a substantial positive real interest rate to attract and retain foreign portfolio investment. The current spread between the policy rate and the new 22.22% inflation rate widens the incentive for foreign investors, a key objective for the bank.

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An early rate cut could be interpreted as a premature declaration of victory, potentially spooking the very investors the high-rate environment is designed to attract. The MPC will instead seek more conclusive evidence that this disinflation trend is durable and not merely a statistical quirk before contemplating any loosening of its deeply hawkish stance.