Nigeria’s headline inflation rate moderated slightly to 15.10% year on year in January 2026, down from 15.15% in December 2025, according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics.

The marginal decline of 0.05 percentage points continues a multi-month trend of easing inflation, offering a glimmer of hope that price pressures may be stabilizing. On a year-on-year basis, the January 2026 rate represents a dramatic improvement compared to 27.61% recorded in January 2025.

However, despite this consistent decline, many Nigerians report that they have yet to feel the benefits in their daily spending. Surveys and market observations indicate that the cost of essential goods and services—particularly in urban centers—remains high, with staple food items, transport, and household expenses continuing to strain household budgets. Analysts note that while headline figures signal moderation, the impact of past inflationary shocks, supply constraints, and imported cost pressures has prevented these improvements from translating fully to consumer affordability.

Inflation Trends and Key Drivers

Month-on-month, Nigeria experienced a contraction in prices, with inflation falling by 2.88% in January, compared to a 0.54% increase in December 2025. This 3.42 percentage point drop indicates that the general price level fell during the month, with some relief particularly in agricultural produce and select manufactured goods. Yet, broader inflation remains elevated: the twelve-month average CPI for the period ending January 2026 stands at 21.97%, up 4.37 percentage points from the same period a year ago, highlighting persistent underlying price pressures.

Food inflation, which accounts for the largest share of household expenditures, declined sharply to 8.89% year on year in January 2026, from 29.63% in January 2025. Month-on-month, food prices fell by 6.02%, a steep decline from –0.36% in December 2025. Staples such as water yams, eggs, green peas, groundnut oil, soya beans, palm oil, maize grains, guinea corn, beans, beef, melon (egusi), cassava tubers, and cowpeas recorded notable price reductions. The twelve-month average food inflation rate stood at 20.29%, signaling sustained easing over the past year.

Core inflation, which strips out volatile food and energy prices, moderated to 17.72% year on year, down from 25.27% in January 2025. Month-on-month, core prices declined 1.69%, reflecting slower growth in non-food items such as housing, education, healthcare, and transport. The twelve-month average core inflation dropped to 22.84%, illustrating that although headline pressures have moderated, significant cost pressures remain in the broader economy.

Urban and Rural Disparities

Urban areas saw inflation decline to 15.36% year on year, a fall of 14.09 percentage points from January 2025. Month-on-month, urban prices fell 2.72%, indicating some easing in cities. Nonetheless, the twelve-month average urban inflation remained elevated at 22.30%, suggesting that high prices in key consumption categories continue to affect households.

Rural inflation mirrored the downward trend, with year-on-year inflation at 14.44%, down from 25.04% a year prior. Month-on-month, rural prices fell 3.29%. The twelve-month average rural inflation decreased to 21.03%, indicating that while rural households have seen price pressures ease, cost-of-living challenges persist, particularly for staple foods and agricultural inputs.

Why Consumers Are Still Feeling the Pinch

Despite the encouraging moderation in headline and food inflation, many Nigerians lament that the numbers do not fully capture their lived experience. Transport costs, fuel-related price adjustments, and imported goods have kept overall household expenses elevated. Analysts note that while the CPI provides a macroeconomic snapshot, it may understate regional disparities, supply chain disruptions, and the residual impact of inflation from 2025.

The perceived disconnect has raised questions about the real-world impact of monetary policy interventions. The Central Bank of Nigeria (CBN) has maintained tight liquidity and high-interest rates to curb inflation, a policy economists say has a negative impact on the economy as it makes borrowing difficult, especially for SMEs.

However, economists highlight that January’s easing trend is nevertheless a positive signal for the first quarter of 2026. It suggests that supply-side pressures may be easing and that policy measures—such as targeted subsidies, import facilitation, and improved agricultural output—are beginning to have some effect. Still, they caution that for inflation to have a meaningful impact on household consumption, price reductions must become widespread, sustained, and reflected in the cost of goods and services that matter most to Nigerians.

Looking ahead, analysts expect that the central bank will respond to the decline by easing interest rates as soon as the next Monetary Policy Committee meeting. While the headline inflation moderation is a welcome development, it has ignited a discussion about ensuring that price relief reaches Nigerian consumers, which is deemed critical for sustaining confidence in the economy and supporting broader economic recovery.

Nigeria’s banks processed $16.78 billion in capital inflows in the first nine months of 2025 — a 131.8% jump year-on-year — with nearly all funds concentrated in short-term portfolio investments, according to the Q3 2025 Capital Importation report released by the National Bureau of Statistics.

The figure represents a 131.81% increase compared to the $7.236 billion recorded during the same period in 2024, underscoring a sharp rebound in foreign investor activity. However, the composition of the inflows shows that approximately 97% entered as foreign portfolio investments (FPIs), while only 3.3% qualified as foreign direct investment (FDI).

The data suggest that banks primarily acted as financial conduits for portfolio flows rather than as ultimate beneficiaries of long-term capital deployment.

Capital importation strengthened steadily across all three quarters of 2025.

In Q1, inflows reached $5.64 billion, up 67.12% from $3.38 billion in Q1 2024. The pace accelerated in Q2, with $5.12 billion recorded — a 96.60% increase from $2.60 billion a year earlier. By Q3, inflows climbed to $6.01 billion, representing a 380.16% surge compared to $1.252 billion in Q3 2024.

Together, these quarterly performances lifted year-to-date inflows to $16.774 billion, already surpassing the full-year 2024 total.

Of the total inflows in the nine-month period, about $13.6 billion was invested in bonds and money market instruments, while only $590 million went into equity investments. This distribution reinforces the dominance of fixed-income securities in attracting foreign capital.

In November 2025, Central Bank of Nigeria Governor Olayemi Cardoso said at the 60th Annual Bankers’ Dinner that Nigeria had recorded $20.98 billion in foreign capital inflows in the first ten months of 2025.

“Foreign capital inflows reached US$20.98 billion in the first ten months of 2025, a 70% increase over total inflows for 2024 and a 428% surge compared to the US$3.9 billion recorded in 2023, reflecting a clear resurgence in investor confidence,” Cardoso said.

Banks as Primary Gateways

The Q3 data show a concentration of inflows among a handful of international and tier-one banks.

Standard Chartered Bank Nigeria Limited recorded the highest share in Q3 with $2.115 billion, accounting for 35.17% of total inflows. Stanbic IBTC Bank Plc followed with $1.789 billion, representing 29.75%.

Citibank Nigeria Limited processed $561.40 million, while Access Bank Plc recorded $385.03 million. Rand Merchant Bank received $306.92 million, Ecobank Nigeria Plc $299.91 million, and First Bank of Nigeria Plc $254.29 million. Zenith Bank Plc, Guaranty Trust Bank Plc, and Fidelity Bank Plc recorded comparatively smaller shares.

The concentration pattern indicates that foreign investors continue to rely on globally connected institutions and top-tier domestic banks to intermediate capital flows into Nigeria’s financial markets.

In Q1 2025, Standard Chartered, Stanbic IBTC, and Citibank accounted for roughly 80% of total capital importation, highlighting their central role in facilitating cross-border portfolio transactions.

Sectoral data show that the banking sector attracted $3.142 billion in Q3 alone, equivalent to 52.25% of total capital imported during the quarter. The financing sector followed with $1.855 billion, or 30.85%.

Production and manufacturing received just $261.35 million, accounting for 4.35% of total inflows. The disparity underscores the limited penetration of foreign capital into sectors directly linked to industrial expansion and job creation.

In terms of source countries, the United Kingdom led with $2.935 billion, representing 48.80% of Q3 inflows. The United States contributed $950.47 million, while South Africa accounted for $773.95 million.

The geographic pattern reflects Nigeria’s continued integration with major global financial centers, though the data do not distinguish between FDI and portfolio components within each country’s contribution.

Sustainability Questions

The surge in capital importation signals renewed foreign investor appetite, driven largely by elevated domestic interest rates and attractive yields on treasury bills and bonds. Nigeria’s monetary tightening cycle has positioned its fixed-income market as a high-yield destination.

However, the overwhelming dominance of portfolio flows raises questions about durability. Portfolio capital is highly sensitive to global risk sentiment, exchange rate expectations, and interest rate differentials. A shift in global liquidity conditions or domestic policy direction could trigger reversals.

By contrast, FDI — which supports infrastructure development, factory construction, and long-term enterprise growth — remains marginal at just over 3% of total inflows.

The 2025 figures, therefore, present a dual narrative. On one hand, capital importation has rebounded strongly, surpassing 2024 levels within nine months. On the other hand, the structure of those inflows suggests that Nigeria’s financial system is serving primarily as a channel for short-term investments rather than as a magnet for long-term productive capital.

Foreign Direct Investment made up just 3.3% of Nigeria’s $16.78 billion capital inflows in the first nine months of 2025, underscoring the economy’s continued reliance on short-term portfolio funds.

Nigeria recorded $565.21 million in Foreign Direct Investment (FDI) between January and September 2025, even as total capital importation surged to $16.78 billion, according to the latest data from the National Bureau of Statistics.

The contrast between the strong headline inflows and the limited scale of long-term investment highlights a structural imbalance in the country’s capital profile. While Nigeria is attracting foreign money at levels that already exceed the $12.32 billion recorded in the whole of 2024, most of that capital remains short-term and yield-driven.

Quarterly capital importation remained robust throughout 2025. The first quarter delivered $5.64 billion, followed by $5.12 billion in the second quarter and a stronger $6.01 billion in the third quarter. The Q3 figure marked the highest quarterly inflow in three years.

Yet FDI — widely regarded as the most stable and development-oriented form of foreign capital — accounted for only a small fraction of that total. FDI rose gradually from $126.29 million in Q1 to $142.67 million in Q2 before increasing to $296.25 million in Q3. The third-quarter improvement signals some recovery, but the cumulative figure remains modest in absolute terms and small relative to total inflows.

Portfolio investment exceeded $14 billion during the same nine-month period, reinforcing the dominance of financial market-driven flows.

This imbalance matters because FDI typically supports factory construction, infrastructure projects, technology transfer, and employment generation. Portfolio inflows, by contrast, are primarily invested in treasury bills, bonds, and other financial instruments.

The Yield Effect and Monetary Policy Transmission

The surge in portfolio flows aligns with Nigeria’s elevated domestic interest rate environment. Tight monetary policy and high fixed-income yields have positioned Nigeria as an attractive destination for foreign investors seeking carry trade opportunities.

Higher returns on naira-denominated assets have pulled in foreign capital into banking and financing sectors, which continue to absorb the majority of inflows. In Q3 alone, banking attracted more than $3.14 billion, while the financing sector accounted for $1.86 billion. By comparison, manufacturing received just $261.35 million.

This pattern suggests that foreign capital is largely circulating within financial markets rather than being deployed into productive sectors such as industrial manufacturing, agriculture, energy, or infrastructure.

The concentration in finance improves liquidity conditions and supports foreign exchange stability in the short term. However, it does little to expand Nigeria’s productive base or diversify its export capacity.

Source Countries and Capital Composition

The United Kingdom led capital inflows in Q3 with $2.94 billion, followed by the United States at $950.47 million and South Africa at $773.95 million. The data do not disaggregate how much of these flows represent FDI versus portfolio investment, but given overall composition trends, the majority likely reflects financial investments rather than greenfield or strategic corporate commitments.

The absence of significant sectoral diversification further reinforces the view that Nigeria’s capital recovery is concentrated in financial instruments rather than long-term business expansion.

The composition of capital inflows has direct implications for economic growth. FDI tends to generate multiplier effects through supply chains, skills development, and employment. It also signals investor confidence in long-term policy stability and market fundamentals.

Portfolio flows, while beneficial for boosting reserves and stabilizing the currency, are highly sensitive to interest rate differentials and global risk sentiment. A shift in global liquidity conditions, a fall in domestic yields or renewed exchange rate volatility could trigger rapid outflows.

Nigeria experienced similar dynamics in previous tightening cycles, when strong inflows reversed following changes in global conditions.

The 2025 data, therefore, present a dual narrative. On the surface, capital importation has rebounded sharply, surpassing full-year 2024 levels within nine months. Beneath that strength lies a familiar vulnerability: limited long-term investment relative to short-term financial flows.

Economists note that for Nigeria to translate capital inflows into sustained structural transformation, the composition will need to shift toward sectors that expand productive capacity. They also warn that without stronger FDI growth, the current surge may support macroeconomic stability but fall short of driving durable employment, industrialization, and broad-based economic expansion.