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Nigeria’s inflation rate has continued to cool, falling to 18.02 per cent in September from 20.12 per cent in August 2025. The inflation rate drop was largely driven by the rebasing and positive outcome of key reforms instituted by the Central Bank of Nigeria (CBN), which triggered continued FX stability, spike in foreign reserves to $43 billion. CBN governor, Olayemi Cardoso told global investors at the IMF Annual Meetings in Washington DC, that naira is becoming more competitive at the international markets, and presents great opportunity for investors to invest more in domestic economy, reports Ibrahim Apekhade Yusuf

The ongoing moderation in inflation rate, rising competitiveness of the naira and growth in foreign reserves all point to a positive phase in Nigeria’s economic position.

The International Monetary Fund (IMF) relied on these indicators to project a 3.9 per cent growth for Nigeria in 2025 as well as expanded stability in the FX markets.

Already, the National Bureau of Statistics (NBS) data showed that headline inflation rate eased to 18.02 percent in September 2025 from 20.12 percent in August 2025.

This was contained in its Consumer Price Index (CPI) September 2025 report.

“In September 2025, the Headline inflation rate eased to 18.02 per cent relative to the August 2025 headline inflation rate of 20.12 per cent,” the NBS said.

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These macroeconomic advantages include the progressive narrowing of the gap between the official and parallel market rates as well as positive balance of payments.

The FX reforms, instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN), new policies instituted by the Federal Government to boost local production, reduce forex demand pressure, and lessen domestic prices have been instrumental to macroeconomic stability.

The expectations are that the apex bank sustains the forex reforms while the fiscal authority strengthens efforts at enhancing FX earnings, especially from gas, oil and non-oil exports.

Analysts said such moves will be sustaining inflation drop as seen in the last report released by the National Bureau of Statistics (NBS) which showed that on a year-on-year basis, the headline inflation rate was 14.68 per cent lower than the rate recorded in September 2024 (32.70 per cent).

On a month-on-month basis, however, NBS said the headline inflation rate in September 2025 was 0.72 per cent, which was 0.02 per cent lower than the rate recorded in August 2025 (0.74 per cent).

According to the report, this means that in September 2025, the rate of increase in the average price level was lower than the rate of increase in the average price level in August 2025.

The drop was largely driven by base effects, continued FX stability, and minimal volatility in energy prices.

State of the naira

The naira has achieved a notable milestone, strengthening by 3.5 per cent against the U.S. dollar over the past ten months, reaching N1,500/$ yesterday at the parallel market. This recovery, though modest, signals a crucial shift, driven by coordinated adjustments to fiscal and monetary policies by the Federal Ministry of Finance and the Central Bank of Nigeria (CBN).

The start of the year saw the Naira trading at around N1,555/$. However, a brief period of instability saw the rate slip to a high of N1,597/$ by the end of April. The subsequent six months were marked by intense policy intervention. The naira briefly firmed up at N1,475/$ in October 2025 at the official market before settling at N1,500/$ at the parallel market yesterday, marking a 3.5 per cent gain from the January starting point.

CBN Governor Yemi Cardoso says naira is turning the corner, and becoming more competitive in the international markets.

He said Nigeria’s economy has been fully restructured and is now resilient, with huge buffers against global risks.

He spoke during the Intergovernmental Group of Twenty-Four (G-24) press briefing at the ongoing IMF/World Bank Annual Meetings in Washington DC, US.

Cardoso, who is the leader of the Nigeria delegation at the meetings, said the naira has equally emerged as a competitive currency, with the economy witnessing positive trade balances and large businesses moving from imports to export of locally produced goods and commodities.

According to him, the positive economic indicators have combined to create resilient and strong buffers, keeping the economy in great shapes.

Speaking on the impact of the trade tariffs on the domestic economy, the CBN boss said the tariffs are less of a problem for the country.

“And for us again, oil is basically the only commodity that was so exposed to the tariffs, and the impact of that was relatively modest. We now have a more competitive currency with the results that, for once, we have a situation where we have a positive balance of trade surplus, and we expect it to be six per cent in GDP for some time,” he said.

“So basically, what is happening is a complete restructuring of the economy, where we are encouraging people to go into domestic production, and, of course, discouraging imports,” he added.

“And I think we were very fortunate, because a lot of the things that were needed to have been done, we did them much earlier, and as a result of that, we’re able to create resilience and buffers against potential shocks,” he stated.

Views from other stakeholders

The Director-General, the West African Institute for Financial and Economic Management (WAIFEM) Dr. Baba Musa, has called on the government to ensure that 3.9 per cent growth for Nigeria in 2025 translates to decent jobs, rising incomes, improved productivity, and broader social welfare.

In his report presented at the recently concluded 2025 IMF/World Bank Annual Meetings in Washington DC, titled, “Nigeria’s Economic Outlook at a Turning Point”, he said as Nigeria moves further into 2025, Nigeria’s economic story is one of resilience, renewal, and strategic recalibration.

Musa, who is also the President, Nigerian Economic Society, said Nigeria’s economic trajectory is increasingly encouraging with the International Monetary Fund (IMF) projecting real Gross Domestic Product (GDP) growth of 3.9 per cent in 2025, up from 3.5 per cent in 2024, with further acceleration to 4.2 per cent in 2026.

Musa said Nigeria in 2025 is at a critical inflection point, cautiously optimistic yet structurally fragile.

“Gains in growth, inflation moderation, and investment confidence mark important progress, but the work is far from complete. To sustain the recovery, Nigeria must maintain macroeconomic stability, deepen structural reforms, and ensure that growth translates into tangible improvements for citizens. Achieving this requires collaboration among government, private sector, civil society, and development partners,” he said.

According to him, by committing to policy consistency, human capital investment, and inclusive growth, Nigeria can consolidate its recovery and emerge as a more competitive, resilient, and equitable economy in the years ahead.

“Globally, economies are grappling with slowing growth, projected at 2.7% in 2025 by the IMF for advanced economies, and heightened geopolitical risks that affect trade and investment. Against this backdrop, Nigeria has demonstrated remarkable determination. Domestically, inflationary pressures, infrastructure deficits, and unemployment persist, yet they now represent policy frontiers rather than defining constraints,” he said.

Musa said recent policy measures, ranging from fiscal consolidation to targeted monetary adjustments, have laid the groundwork for a sustainable growth trajectory.

“The real test, however, lies not only in achieving stability but in ensuring that it translates into tangible socio-economic outcomes: decent jobs, rising incomes, improved productivity, and broader social welfare. If Nigeria deepens reforms, invests strategically in human capital, and leverages its structural advantages, the country can achieve not only recovery but inclusive and durable economic transformation,” he said.

He said the growth for Nigeria is underpinned by stronger oil production following operational improvements and policy reforms in the petroleum sector.

“Recovery in services, particularly telecommunications, financial services, and transport, reflecting resilient domestic demand. Improved agricultural output, thanks to favorable weather patterns and government support for mechanization and inputs,” he said.

He said the recent GDP rebasing has also given a more accurate reflection of the economy, capturing growth in high-potential sectors such as digital services, modular refining, and the creative industries. This expanded view highlights opportunities for job creation, innovation, and revenue generation that were previously underappreciated.

According to him, inflation remains elevated but is gradually moderating.  “Headline inflation declined to 18.02 per cent in September 2025, down from 20.12 per cent in August, reflecting improved food supply, seasonal harvests, and targeted interventions in the energy market. The Central Bank of Nigeria’s interest rate cut, the first since 2020, signals a nuanced policy shift: a deliberate effort to balance price stability with growth and employment objectives. This approach is consistent with modern macroeconomic management, where inflation targeting is tempered by the need to stimulate investment and production in key sectors,” he said.

“Investor sentiment is improving, illustrated by Shell’s approval of the HI Offshore Gas Project, expected to supply 350 million standard cubic feet of gas per day to Nigeria LNG. Economically, such projects deliver multiplier effects: they stimulate domestic suppliers, create high-skill and semi-skilled jobs, and strengthen Nigeria’s position as a reliable energy hub in Africa. They also enhance balance of payments stability, by promoting export-oriented production,” he said.

Also the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf said the consistent deceleration in inflation rate is a very good development for the economy.

According to him, the disinflationary trend is a reflection of an improvement in the macroeconomic environment, which is good for investors’ confidence.

He said: “The disinflationary trend is also an indication of improving stability in the microeconomic environment, which is good for planning and for investors’ confidence. It enhances the prospect of increasing levels of investments, both from domestic investors and for foreign investors. Deceleration in inflation is a very important indicator that the macroeconomic environment is improving.

“But in order for this improvement to reflect in welfare, we need to do a lot more. Because what we are seeing is a deceleration in headline inflation. We need to see a faster deceleration in food inflation in particular. That is extremely very important. Not just food inflation, but also other basic needs like pharmaceutical products, transportation, energy costs, cooking gas, and things like that. These are basic things that touch the welfare of the people. So at the macro level, we are seeing an improvement in terms of prices. But there has to be some deliberate policy measures that will be targeted at specific product ranges to deepen the impact.

“This will require a combination of policies, both monetary policy and fiscal policy, and even tax policy, to be able to effectively ensure that this drop in inflation is reflected in the welfare of the people. It’s not just something that monetary policy alone can tackle, it’s something that needs a very strong handshake. Beyond the handshake, independent policy instruments, fiscal policy instruments will be activated to address the issue of welfare”.

Yusuf said the more effective way to get the macroeconomic gains to the ordinary people is to reduce the benchmark interest rate in a targeted approach to addressing the issue of cost of production of those items that are consumed by the ordinary citizens.

Analysts at Afrinvest West Africa stated that they expected inflation to maintain a gradual easing trajectory in the near term, supported by continued forex stability, early harvest inflows, and relatively subdued global commodity prices.

Afrinvest noted that with the positive development in reduction in oil losses, with crude oil losses dropping to 16-year low, there are three major benefits to the macroeconomic dynamics.

“To start with, a relief in fiscal revenue is on the cards. Despite disparity in latest production levels and federal government’s budget benchmark-July crude oil production of 1.51mbpd and government’s budget of 2.01mbpd, as well as international price dynamics-September Average: $66.96/bbl, government Budget: $75.00/bbl, reduced losses from crude oil theft should translate to increased crude oil available for sales, thereby boosting FAAC allocations and limiting fiscal strain.

“Secondly, we expect to see a boost in forex liquidity and CBN’s external reserve. Crude oil exports (accounting for c.85.0 per cent of forex earnings remains Nigeria’s chief source of forex inflows. It is important to note that the Naira has strengthened in 2025 , up 2.4 per cent so far this year  to N1,501.50 per dollar,  largely driven by policy reforms from the CBN, as such higher export volumes  should result in improved forex inflows, thereby easing pressure on the Naira.

“Finally, reduction in crude oil losses could boost investors’ sentiment in the oil and gas sector given the recent wave of divestment in the sector characterised by asset sales from IOCs to indigenous oil companies. A major driver of this trend was the persistent security and operational risks associated with oil theft and pipeline vandalism. Nevertheless, with crude oil losses now at historic lows, there is bound to be renewed optimism which could rekindle investment appetite in the upstream segment, strengthening output prospects, and reinforcing Nigeria’s fiscal and external buffers,” Afrinvest stated .

Meanwhile, SCM Capital had stated that it expected inflation rate to continue its gradual downward trend in August, supported by forex stability, tight monetary conditions from the CBN’s hold policy, and subdued energy prices.

Analysts however cautioned that food inflation remains a key risk, as persistent insecurity in major food-producing regions and rainy season logistics challenges could sustain upward pressure on prices.

“While base effects may moderate year-on-year inflation, supply chain disruptions could lift month-on-month readings. Economic reforms, food harvest, and CBN’s inflation anchoring policy are however expected to support the disinflation momentum,” SCM Capital stated.

CardinalStone also stated that inflation rate is expected to remain on its disinflationary path, aided by sustained declines in energy prices as the Dangote refinery maintains its distribution strategy, which removes transportation costs for fuel marketers and large-scale consumers.

Analysts noted that supports like the energy cost, could offset upward pressures from food inflation risks and seasonal forex demand during the summer months—a trend typically seen in the third quarter.

Other steps to support economy

The CBN under Cardoso is cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain.

The move has led to substantial accretion to the gross FX reserves and supported the stability of the naira.

Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under Cardoso puts in a lot of effort in attracting more inflows into the economy.

Diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

As naira exchange rate stabilises, import costs to dip

Import costs have been tipped to drop significantly as the naira continues to gain more ground across markets.

The naira appreciated significantly last week, strengthening from N1,580 to N1,530 per dollar, a gain of about 3.25 per cent at the parallel markets. The local currency exchanged at N1,536 per dollar at the official markets, creating N6 per dollar rate gaps between both markets.

Importation costs in Nigeria include various taxes and charges, primarily import duties, VAT, and other levies. These costs are calculated based on the CIF value (Cost, Insurance, and Freight) of the goods, which includes the cost of the goods, insurance, and shipping.

The cost, insurance and freight (CIF) price is the price of a good delivered at the frontier of the importing country, or the price of a service delivered to a resident, before the payment of any import duties or other taxes on imports or trade and transport margins within the country.

Changes in exchange rate can significantly impact the cost of imports, as duties and other charges are often calculated based on the prevailing exchange rate.