CPPE: Benefits of declining inflation rate not fully felt by households

The Centre for the Promotion of Private Enterprise (CPPE) says Nigerian households have not benefited from the decline in the inflation rate due to persistent structural constraints.

Earlier on Monday, the National Bureau of Statistics (NBS) said Nigeria’s headline inflation rate dropped to 16.05 percent in October.

Addressing the decline in a statement, Muda Yusuf, chief executive officer (CEO) of the CPPE, described the sharp moderation as a significant achievement for macroeconomic stability.

“However, the full welfare benefits are yet to be sufficiently felt by households due to persistent structural constraints—especially in food supply, transportation, energy, housing, and essential services,” he said.

Yusuf said to ensure disinflation delivers real relief to households, Nigeria must implement deliberate and sustained reforms across key sectors.

He added that with coordinated monetary, fiscal, and structural policies, the current disinflation trajectory can be strengthened, expanded, and maintained.

‘DECLINE IN INFLATION RATE DRIVEN BY BASE EFFECTS, EXCHANGE RATE STABILITY’

Yusuf said the decline in headline inflation was driven by base effects, exchange rate stability, and improving macroeconomic fundamentals.

“Similar moderation was seen across food and core inflation indices. However, inflationary pressures remain elevated in critical household sectors—including food, transportation, housing, utilities, education, and health—which jointly account for 84% of inflation,” he said.

“Persistent structural weaknesses such as high logistics costs, energy challenges, security concerns in food-producing areas, and climate-related disruptions continue to constrain supply and limit the welfare gains of disinflation.

“This policy brief outlines the inflation trends, identifies underlying pressures, and proposes targeted interventions to consolidate disinflation while addressing root causes of cost escalation.”

Yusuf said Nigeria’s macroeconomic environment “continued to stabilise in October, reflected in a sharp deceleration in the inflation rate”.

“The persistent downward trend is indicative of improving policy coordination in monetary, fiscal, and exchange rate management. The magnitude of the October decline exceeded expectations, signaling stronger confidence in the ongoing reform agenda,” he said.

KEY DRIVERS OF DISINFLATION

Yusuf said the high reference point of last year’s October inflation contributed to a statistical decline in year-on-year inflation.

“This base effect was a major contributor to the October 2025 outcome,” the CPPE CEO said.

On foreign exchange (FX) rate stability, he said the naira showed modest appreciation and sustained stability over recent months, adding that this helped ease imported inflation, particularly in sectors dependent on imported raw materials, inputs, and energy.

Furthermore, Yusuf said that improved macroeconomic coordination, through monetary tightening, better FX liquidity, reduced speculative demand for foreign currency, and stronger investor sentiment, had helped enhance price stability.

He explained that the coordinated policy actions collectively strengthened Nigeria’s disinflation trajectory.

Yusuf noted that despite this progress, five key sectors still accounted for 84 percent of October’s inflationary pressure.

The economist identified the sectors as food and non-alcoholic beverages, transport, housing and utilities, education, and health.

He emphasised that the sectors had the most direct impact on the daily cost of living, making them central to effective inflation management.

Yusuf said structural challenges — such as high transport and energy costs, expensive credit, climate shocks, cross-border pressures, insecurity in farming areas, and an ageing farming population — continued to limit the impact of disinflation on actual prices.