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Nigeria recorded the sharpest decline in annual inflation among Africa’s 10 largest economies last month, as relative naira stability helped

BY Bunmi Bailey

Nigeria recorded the sharpest decline in annual inflation among Africa’s 10 largest economies last month, as relative naira stability helped slow price growth, even as rising oil prices threatened to reignite inflationary pressures across the continent.

The country’s inflation rate fell to 14.63 percent in September from 15.39 percent in August, a decline of 0.76 percentage points, according to Trading Economics data analysed by BusinessDay. It marked the fourth consecutive month of slowing inflation and the lowest rate since January 2025.

Egypt recorded the second-largest decline, with annual urban inflation easing by 0.6 percentage points to 13.9 percent from 14.5 percent. Angola’s inflation fell by 0.32 percentage points to 8.43 percent, while Ethiopia recorded a smaller decline of 0.2 percentage points to 14.9 percent.

The declines contrasted with renewed price pressures in South Africa, Kenya, Uganda, Ghana and Côte d’Ivoire. Tanzania’s inflation rate remained unchanged.

The divergent trends highlight the uneven progress African economies are making in containing inflation, as domestic currency movements, food prices and rising global energy costs shape their outlooks.

For Africa’s most populous nation, the latest figures shows that improved foreign-exchange stability is helping to sustain disinflation. However, persistently high food inflation and rising oil prices could complicate further progress.

Naira stability supports disinflation

Nigeria’s inflation slowdown was accompanied by easing core inflation, which excludes certain volatile items, and slower price increases across several consumer categories, including health, education, housing and household equipment.

According to the Centre for the Promotion of Private Enterprise (CPPE), headline inflation declined by 76 basis points, while core inflation moderated from 13.29 percent to 12.95 percent.

“The relative stability of the foreign exchange market has also helped to moderate imported inflation and improve business planning,” the centre said in a recent report.

The association, led by Muda Yusuf, its director-general and former head of the Lagos Chamber of Commerce and Industry, said the slowdown had implications for monetary policy.

“With inflation moderating, the case for further monetary easing has strengthened, particularly given the elevated cost of credit and its adverse consequences for investment, working capital and productive capacity,” CPPE said.

The naira’s performance marks a turnaround following two years of sharp depreciation after major foreign-exchange reforms in 2023 and 2024. The currency stabilised in the second half of 2025 and appreciated against the dollar, exiting Africa’s 10 worst-performing currencies in October that year.

The improvement reflected stronger foreign-exchange liquidity, higher external reserves and policy measures aimed at improving the functioning of the foreign-exchange market.

By October 23, the official exchange rate stood at about N1,355.80 per dollar. Data from African Markets, a real-time market-tracking platform, showed that the naira was the second-best-performing currency among 17 African currencies against the dollar year-to-date as of October 27, gaining nearly seven percent.

The relative strength has provided some relief to importers and borrowers with dollar exposure, while reducing the naira value of foreign-currency liabilities.

However, the slowdown in headline inflation does not mean prices are falling. Food inflation remained elevated at 19.59 percent in September, barely changed from 19.57 percent in August. Inflation also accelerated in restaurants and hotels, transportation, and miscellaneous goods and services.

Core inflation declined for a fourth consecutive month to 12.95 percent, its lowest level since January 2021. Yet monthly core inflation rose to 1.11 percent in September from -0.06 percent in August, suggesting that underlying price pressures have not been fully contained.

The figures underline the distinction between disinflation and deflation: prices are rising more slowly overall, but households continue to face high costs for essential goods, particularly food.

Rate cuts offer relief, but risks remain

Nigeria’s easing inflation has given the Central Bank of Nigeria room to reduce borrowing costs, although the impact on businesses will depend on how quickly lower policy rates translate into cheaper credit.

In September, the CBN cut its Monetary Policy Rate by 350 basis points to 23 percent from 26.5 percent, its largest reduction in at least two decades, as policymakers judged that conditions could accommodate monetary easing without derailing disinflation.

The bank also recalibrated its Standing Facilities Corridor to +50/-300 basis points around the policy rate, while leaving cash reserve requirements unchanged.

CPPE said the reduction could improve financial planning and investment confidence, although transmission to commercial lending rates might take time.

Lower financing costs would be particularly beneficial to capital-intensive enterprises, manufacturers, agricultural businesses and micro, small and medium-sized enterprises, the centre added.

Nigeria’s move formed part of a broader easing trend among some African economies as the West African country, Zambia, Zimbabwe and Angola collectively cut their benchmark interest rates by 950 basis points in September, reflecting the room some policymakers saw to support economic activity as inflation eased.

However, the policy direction was not uniform. South Africa raised its benchmark repo rate by 25 basis points to 7.25 percent in September as inflation risks increased.

Oil prices pose a fresh risk

Rising global energy prices present a significant risk to the inflation outlook across Africa, particularly for economies that rely heavily on imported fuel and other commodities.

South Africa’s inflation rose to 4.5 percent in September from 4.4 percent in August. Transport inflation increased to 10.8 percent from 8.8 percent, as higher fuel costs fed into consumer prices.

The South African Reserve Bank raised its benchmark repo rate by 25 basis points to 7.25 percent in September, warning that inflation could rise above five percent later in 2026 and early 2027 as fuel-price increases spread through the economy.

Ghana’s inflation rose to 5.2 percent from five percent, with food inflation increasing to 4 percent from 3 percent despite a slowdown in non-food inflation. Kenya’s rate climbed to 6.8 percent from 6.6 percent, partly reflecting annual food inflation of 9.5 percent and transport costs that remained elevated at 15.6 percent.

Uganda’s inflation increased to 4.6 percent from 4.1 percent, while Côte d’Ivoire’s rose to 1.6 percent from 1.2 percent. Tanzania’s rate held at 4.3 percent.

These increases came amid renewed pressure in global energy markets following the conflict in the Middle East. Brent crude rose from around $100 per barrel in early September to approximately $103.50 by the end of the month, before climbing further to $115 by Wednesday Afternoon, according to Oilprice.com.

Higher oil prices can raise fuel, transport and production costs, while increasing the cost of imported goods in economies dependent on external energy supplies. The extent of the impact varies according to exchange-rate movements, domestic supply conditions and the degree to which governments can cushion consumers from higher prices.

The World Bank has warned that rising global commodity prices following the outbreak of the Middle East conflict have been transmitted through higher consumer prices in more than half of sub-Saharan African economies.

The lender projected that median inflation in sub-Saharan Africa would rise from 3.7 percent in 2025 to 5.5 percent in 2026, with economies heavily reliant on imported commodities and having limited exchange-rate flexibility particularly exposed.

For Nigeria, higher energy costs could feed into transport, distribution and production expenses, eroding some of the gains from slower inflation. The effect will depend partly on how long the oil-price shock lasts and how it filters through domestic supply chains and the foreign-exchange market.