Nigeria’s inflation outlook is expected to improve significantly in 2026, with the Central Bank of Nigeria (CBN) projecting headline inflation to moderate to an average of 12.94%, driven by easing food prices and a decline in the cost of premium motor spirit (PMS).
The projection, contained in the apex bank’s 2026 Macroeconomic Outlook for Nigeria, reinforces expectations that price pressures may finally be coming under control after years of instability.
According to the CBN, improved domestic supply conditions and stabilizing energy prices are expected to reduce cost pressures on households and businesses, supporting broader price stability.
Register for Tekedia Mini-MBA edition 19 (Feb 9 – May 2, 2026): big discounts for early bird.
Tekedia AI in Business Masterclass opens registrations.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab: From Technical Design to Deployment (next edition begins Jan 24 2026).
“Headline inflation is projected to moderate to an estimated average of 12.94 per cent in 2026, driven by declining food and premium motor spirit (PMS) prices,” the bank said in the report.
The projection comes against the backdrop of a sharp statistical reset in Nigeria’s inflation data following the recent rebasing of the Consumer Price Index (CPI). The rebasing, which updated consumption weights to better reflect current spending patterns, resulted in a notable downward adjustment in headline inflation levels. Following the rebasing, the inflation rate dropped to 14.45% in November 2025 from 16.05% in October, according to the National Bureau of Statistics.
That decline has been widely interpreted as evidence that underlying price pressures may be easing more rapidly than previously assumed, especially as food inflation — long the most persistent driver — shows signs of moderation. Energy-related costs, particularly PMS, have also stabilized relative to the sharp shocks seen earlier in the subsidy reform period.
Despite this improvement, the CBN has maintained a tight monetary stance, keeping the Monetary Policy Rate (MPR) at a high 27%. The decision has drawn increasing scrutiny from economists and business leaders, many of whom argue that monetary conditions are now excessively restrictive relative to the inflation trend.
While the central bank has defended its position by citing the need to anchor inflation expectations and safeguard exchange rate stability, critics say the lag between the inflation slowdown and monetary easing is beginning to weigh heavily on the real economy.
At 27%, the MPR feeds into lending rates that often exceed 30% for many businesses, particularly small and medium-sized enterprises. Economists have repeatedly warned that such borrowing costs are choking productive activity, discouraging investment, and limiting the ability of firms to expand or even sustain operations.
Analysts have noted that while tight policy may have helped stabilize prices and the currency, the absence of any commensurate reduction in the benchmark rate, despite rebased inflation and easing headline numbers, risks undermining growth. Manufacturing firms, agribusinesses, and service providers continue to cite financing costs as one of their biggest constraints, especially in an environment already burdened by weak consumer demand and high operating expenses.
The CBN, however, appears cautious about easing too quickly. In its outlook, the bank pointed to several factors that could still influence liquidity and price dynamics in 2026, including exchange rate movements, fiscal operations, and election-related spending. Political activity ahead of elections is expected to increase government expenditure and financial flows, which could reintroduce inflationary pressures if not carefully managed.
Beyond inflation, the apex bank projected a bullish capital market outlook for 2026, supported by ongoing bank recapitalization, rising investor confidence, and policy measures aimed at strengthening the financial system. Stronger banks, the CBN believes, will be better positioned to intermediate credit and support economic growth, even under tight monetary conditions.
If the inflation projection materializes, it would mark a sharp turnaround from the price instability that defined much of the past two years. A sustained moderation toward the low-teens could ease pressure on households, improve business planning, and gradually restore confidence across the economy.
However, economists argue that monetary policy must evolve alongside the data. With inflation rebased and trending lower, calls are growing louder for the CBN to recalibrate its stance, warning that prolonged ultra-tight policy could deepen stress in the private sector and slow Nigeria’s recovery.
The central bank said it remains committed to deploying appropriate policy tools to sustain macroeconomic stability, support growth, and strengthen the financial system, even as debates intensify over how quickly policy should shift from inflation-fighting to growth support.