CPPE Expresses Mixed Feelings Over Inflation Based On Its September Picture

  

Full  text of his review

By Dr Muda Yusuf 

The Centre for the Promotion of Private Enterprise (CPPE) welcomes the moderation in Nigeria's headline inflation from 15.39% in August to 14.63% in September 2026, representing a decline of 76 basis points. This is a positive development which reinforces the disinflationary trend, strengthens macroeconomic stability and improves the prospects for investment, monetary easing and economic recovery.

However, the inflation report presents a mixed picture. While headline and core inflation moderated, food inflation remained elevated at 19.59%, while monthly energy inflation accelerated sharply to 5.38%. These developments underscore the persistence of significant supply-side pressures and the vulnerability of the economy to energy shocks.

Disinflation Strengthens the Case for Monetary Easing

The decline in headline inflation by 76 basis points, alongside the moderation in core inflation from 13.29% to 12.95%, indicates an easing of underlying price pressures. The relative stability of the foreign exchange market has also helped to moderate imported inflation and improve business planning.

This development has important 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.

High borrowing costs have constrained manufacturing, agriculture, construction, distributive trade and MSMEs. A sustained reduction in interest rates would improve credit affordability, ease financing pressures and support private-sector investment.

However, monetary easing should remain calibrated to inflation expectations, exchange rate conditions and emerging energy-price risks. The objective should be to support productive investment without compromising the gains in macroeconomic stability.

Food Inflation Remains a Major Threat to Household Welfare

Food inflation increased marginally from 19.57% in August to 19.59% in September, exceeding headline inflation by 4.96 percentage points.

This divergence is economically significant. Food constitutes a disproportionately large share of expenditure among low-income households. Consequently, elevated food inflation erodes real incomes, deepens poverty risks and weakens household consumption.

The implications extend beyond household welfare. As families allocate increasing proportions of their incomes to food, expenditure on manufactured products, education, healthcare and other services becomes constrained. This weakens effective demand and adversely affects businesses, especially consumer-facing enterprises.

The persistence of food inflation reflects structural weaknesses in agricultural production and distribution, including insecurity, inadequate rural infrastructure, high logistics costs, post-harvest losses and inefficient market connectivity.

Addressing these constraints requires targeted supply-side interventions rather than reliance predominantly on monetary tightening.

Energy Inflation Emerges as a Major Threat to Price Stability

One of the most significant warning signals is the acceleration in monthly energy inflation from 0.36% in August to 5.38% in September, an increase of 5.02 percentage points. Energy inflation on a year-on-year basis stood at 10.85%. 

This is particularly concerning because energy is a critical input across virtually all sectors. Higher petrol, diesel and gas prices raise transportation, distribution and production costs, with potential secondary effects on food prices and core inflation.

The geopolitical crisis in the Middle East has heightened global petroleum market volatility, exposing the Nigerian economy to external energy-price shocks. Exchange rate stability can moderate the transmission of imported inflation, but cannot fully neutralise rising international energy costs.

The sharp monthly energy-price increase also raises the risk that the recent disinflationary gains could be reversed if higher energy costs persist.

The policy priority should therefore be to strengthen domestic energy resilience through reliable electricity supply, expansion of CNG infrastructure, greater adoption of electric mobility and improved domestic refining efficiency.  A sustainable reduction in inflation requires lowering the economy's structural dependence on expensive and volatile energy sources.

Regional Inflation Disparities Reveal Deep Structural Constraints

The September report exposes substantial geographical differences in inflation.

Urban inflation exceeded rural inflation by 3.18 percentage points, highlighting the relatively greater price pressures facing urban households.

These disparities are consistent with differences in logistics costs, market access, local supply conditions and consumption patterns. 

The policy implications are significant. Improved inter-state connectivity, rural feeder roads, storage facilities, agricultural market infrastructure and security would strengthen domestic supply chains and reduce avoidable distribution costs.  State and local governments have critical responsibilities in addressing these structural constraints.

Implications for Investors and Businesses.

The inflation report offers both opportunities and risks for the private sector.

The moderation in headline inflation improves the outlook for interest rates, financial planning and investment confidence. The Central Bank's September reduction of the Monetary Policy Rate by 350 basis points to 23% provides an important foundation for further easing, although transmission to commercial lending rates may take time. 

Lower financing costs would be particularly beneficial to capital-intensive enterprises, manufacturers, agricultural businesses and MSMEs.

However, the inflation data also contain important cautionary signals. Although annual core inflation declined, monthly core inflation increased from -0.06% in August to 1.11% in September. This suggests that underlying price pressures have not been fully contained. 

Businesses therefore face a mixed operating environment: improving macroeconomic predictability alongside continuing energy, logistics and consumer-demand pressures.

Investors should distinguish between declining inflation and declining operating costs. The former improves the macroeconomic outlook; the latter is essential for stronger profitability, competitiveness and sustainable investment expansion.

Policy Priorities: Consolidating Disinflation Through Structural Reforms

The September report strengthens the case for a more balanced inflation-management strategy. Monetary policy remains important for anchoring expectations and sustaining macroeconomic stability, but many of the remaining inflationary pressures are rooted in structural and supply-side constraints.

The CPPE recommends the following priorities:

Sustain prudent monetary easing: Gradually reduce interest rates as inflation conditions permit, while safeguarding foreign exchange stability and containing inflation expectations.

Prioritise food affordability: Address insecurity in farming communities, agricultural productivity constraints, post-harvest losses and high food distribution costs.

Reduce energy costs: Accelerate electricity-sector reforms, expand CNG and alternative energy infrastructure, and promote efficient and competitive domestic petroleum markets.

Recalibrate monetary and trade policies to ease supply-side challenges, especially in agriculture, agribusiness and manufacturing.

Improve logistics efficiency: Invest in roads, storage, transport infrastructure and inter-state market connectivity, while eliminating multiple levies and checkpoints.

Strengthen subnational accountability: Federal, state and local governments should coordinate reforms that lower production and distribution costs and improve market access.

Conclusion

The September 2026 inflation report provides credible evidence of progress in macroeconomic stabilisation. Headline inflation declined by 76 basis points, while the monthly headline inflation rate fell from 0.71% to just 0.06%. Monthly food inflation also turned negative at -1.55%, providing some immediate relief to consumers. 

Nevertheless, the persistence of 19.59% annual food inflation, the sharp increase in monthly energy inflation and renewed monthly core inflation pressures demonstrate that the gains remain fragile.

The policy challenge is therefore twofold: sustain disinflation through credible macroeconomic management and address the structural factors that keep production, energy, transportation and food costs elevated.

This requires sustained collaboration among the federal, state and local governments, with greater emphasis on productivity, infrastructure, security, energy efficiency and domestic supply capacity.

Dr. Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise [CPPE]

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