In a welcome development for Africa’s largest economy, Nigeria’s inflation rate has eased to 23.71% in May 2025, offering a glimmer of hope for businesses, households, and investors anticipating a cut in interest rates.

According to the latest figures from the National Bureau of Statistics (NBS), this marks a notable slowdown from the previous month’s rate of 24.06%. While inflation remains significantly high, this marginal decrease signals a potential shift in the country’s economic trajectory.

What’s Behind the Slowdown?

The moderation in inflation has been attributed to several factors, including:

  • Stabilisation in food prices, especially in locally produced staples.

  • A relatively more stable foreign exchange rate in recent weeks.

  • Government policies aimed at improving local production and reducing reliance on imports.

  • Ongoing monetary tightening measures by the Central Bank of Nigeria (CBN), which have helped contain price pressures.

Food inflation, which has been a major contributor to the headline rate, saw a slight dip, although it still remains elevated due to supply chain disruptions and security challenges in some agricultural regions.

Monetary Policy Implications

With inflation beginning to ease, economists and market analysts are increasingly hopeful that the Central Bank of Nigeria (CBN) may consider loosening its tight monetary stance later in the year.

The Monetary Policy Rate (MPR), currently at 24.75%, has remained high in an effort to curb inflation and stabilise the naira. However, a sustained trend in lower inflation could provide room for a rate cut, stimulating investment and easing borrowing costs for businesses and consumers.

Outlook for the Nigerian Economy

While this development is promising, experts warn that a single data point is not enough to confirm a long-term trend. Structural issues such as:

  • High energy costs,

  • Insecurity affecting agricultural productivity,

  • And dependence on imports for key goods,

continue to pose significant risks to price stability.

Nonetheless, if current economic reforms are sustained and macroeconomic conditions continue to improve, Nigeria could be on track toward moderate inflation and stronger economic growth in the latter half of 2025.

What This Means for Consumers and Businesses

For everyday Nigerians, a drop in inflation—even modest—can mean:

  • Slower increases in food and transportation costs,

  • Improved purchasing power,

  • And potentially more accessible credit.

For businesses, particularly SMEs, a future rate cut could reduce operational costs and improve profitability.The easing of Nigeria’s inflation to 23.71% is a step in the right direction. While challenges remain, this development brings cautious optimism to policymakers, businesses, and households alike. All eyes will now be on the Central Bank’s next move as the country continues to navigate its path to economic stability.

Source: Vanguard