By Chibuzor Alli
Nigeria’s average inflation rate is projected to fall to 15.6 per cent in 2026 from 23.0 per cent in 2025, offering hope of easing price pressures even as rising energy costs, expensive farm inputs and election-related spending threaten to slow the recovery.
The International Monetary Fund (IMF), in its October 2026 World Economic Outlook update, forecasts that Nigeria’s annual-average inflation will decline further to 14.7 per cent in 2027, signalling a gradual moderation in the country’s persistent cost-of-living pressures.
However, the projected slowdown does not necessarily mean that prices will fall. Rather, it suggests that prices could rise at a slower rate, leaving households and businesses still exposed to the effects of years of elevated inflation.
Coronation Research attributed the anticipated moderation partly to improved exchange rate stability and expanding domestic refining capacity, which could help reduce costs across key sectors of the economy.
In its assessment of the outlook, the research firm noted, “Exchange rate stability and increased domestic refining capacity could help moderate price pressures. However, higher energy and fertiliser costs, alongside election-related spending, may slow the pace of disinflation”.
The warning highlights the risks facing Nigeria’s disinflation drive, particularly as businesses continue to contend with high operating expenses and households struggle with elevated food prices.
Food, Energy Costs Threaten Inflation Relief
Despite the projected decline, high input costs and domestic food supply challenges remain significant obstacles to a faster reduction in inflation.
Agricultural input expenses, including fertiliser, could keep food production costs elevated, while higher energy prices may increase transportation, manufacturing and distribution expenses. These pressures could limit the extent to which slower inflation translates into improved living standards.
The prospect of election-related spending also presents a potential challenge, as additional fiscal expenditure could sustain demand pressures and complicate efforts to bring inflation down.
Coronation Research cautioned that these risks could weaken the pace of disinflation even as broader macroeconomic conditions improve.
The report added, “Increased local refining capacity has further aimed to reduce energy import dependency and temper transportation fuel costs. However, lingering supply risks, higher agricultural input costs, and fiscal pressures continue to pose potential risks to the broader disinflation trend”.
IMF Forecasts Stronger Economic Growth
Alongside the improved inflation outlook, the IMF expects Nigeria’s economy to expand by 4.2 per cent in 2026 and 4.3 per cent in 2027.
The projected growth reflects expectations of continued foreign exchange reforms and sustained activity in the non-oil sector, which has become an important part of Nigeria’s efforts to strengthen economic resilience.
Coronation Asset Management also sees inflation moderating further, with its internal forecast putting Nigeria’s average inflation rate at 14.56 per cent in 2027, broadly in line with the IMF’s projection of 14.7 per cent.
An analyst at the firm said, “While structural headwinds remain, the ongoing economic policy reforms and expanded refining operations provide a strong foundation for steady, long-term price moderation”.
The alignment between the two forecasts points to expectations of gradual improvement, although the eventual pace of recovery will depend on how effectively economic reforms translate into lower production costs, stronger supply conditions and more stable prices.
Reforms Face Test as Nigeria Seeks Price Stability
Nigeria has battled persistent inflation in recent years, driven by exchange rate volatility, domestic supply constraints, higher energy costs and disruptions to international supply chains.
Foreign exchange market adjustments and broader structural reforms have formed part of efforts to address these pressures, support domestic production and improve macroeconomic stability.
The expansion of local refining capacity could also help reduce dependence on imported refined petroleum products and ease some transportation-related costs. However, the extent of the benefit will depend on domestic fuel pricing, supply conditions and the wider cost structure of businesses.
The latest IMF projections suggest that Nigeria could make further progress in reducing inflation over the next two years. Yet the forecast decline will need to be sustained by improvements in food supply, energy affordability, exchange rate stability and fiscal discipline.
For households, the key question is whether slower inflation will eventually translate into meaningful relief from the cost of food, transport and other essential goods. For businesses, a sustained reduction in price pressures could improve cost planning and investment decisions.
While the outlook points to gradual disinflation alongside stronger economic growth, persistent structural challenges mean that the path to more affordable living costs is likely to remain uneven.
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