Nigeria's Inflation Set to Rise Amid Global Uncertainty

Nigeria's inflation is expected to rise in March, marking an end to the 11th consecutive month of declining inflationary pressures. This development is largely attributed to the escalating United States-Iran war, which has sent shockwaves through global energy markets. According to analysts surveyed by BusinessDay, the projected rise in prices will place authorities in a difficult position regarding key monetary decisions in May.

Analysts at Cordros Research forecast that headline inflation will rise to 15.4 percent year-on-year in March 2026, up from 15.06 percent in February. This increase is primarily driven by renewed pressures from food costs, energy prices, and exchange rate volatility. On a month-on-month basis, inflation is expected to rise to 4.2 percent, a significant increase from the 2.01 percent recorded in February.

The rising cost of goods and services is already evident in Nigeria, with staple items such as beans, tomatoes, onions, yams, cereals, tubers, and rice experiencing price hikes. These Increases are attributed to seasonal planting cycles and heightened demand during the fasting period. The existing supply constraints are expected to sustain upward pressure on food inflation.

Separate estimates by analysts at FMDA research also point to an increase in inflationary pressures in March. FMDA projects month-on-month inflation at about 4.02 percent, nearly double the 2.01 percent recorded in February, indicating a broad-based increase in prices. On a year-on-year basis, FMDA expects inflation to edge up to around 15.20 percent, driven by strong monthly price increases outweighing favourable base effects from the corresponding period in 2025.

Data from the World Bank's food market survey supports the trend, showing continued increases in domestic food prices. Key staples such as yam, gari, rice, and maize recorded higher prices in March, with the food price index rising by 0.86 percent month-on-month. Energy costs also rose significantly during the month, with average petrol prices increasing from N1,051.47 in February to between N1,200 and N1,300 in March.

The rise in fuel costs is expected to translate into higher transport and distribution expenses, further amplifying inflation. Exchange rate dynamics have also compounded the pressure, with the naira depreciating by 1.80 percent to N1,379.98 per dollar in March, weakening its capacity to absorb imported inflation. The World Bank noted that inflation has been moderating across several Sub-Saharan African economies, with median inflation declining to 3.7 percent in 2025 from 4.4 percent in 2024.

However, the trend is expected to reverse in 2026, with inflation projected to rise to 4.8 percent due to spillovers from Middle East tensions before easing again in subsequent years. Geopolitical risks arising from the conflict in the Middle East could reverse some of these gains by raising fuel, transportation, and fertiliser costs, thereby exerting upward pressure on food prices.

Despite the consensus around rising inflation, some analysts hold a more optimistic view. Lukman Otunuga, head of market research at FXTM, expects inflation to ease further to 13.4 percent year-on-year, citing persistent signs of moderating price pressures. He noted that continued disinflation could create room for monetary easing by the Central Bank of Nigeria.