Centre warns rising energy costs and persistent food inflation could threaten disinflation gains
The Centre for the Promotion of Private Enterprise (CPPE) has called for further gradual reductions in interest rates following a decline in Nigeria’s headline inflation rate to 14.63 per cent in September 2026.
The figure represents a 0.76 percentage-point decrease from 15.39 per cent recorded in August, strengthening the case for monetary easing and measures to stimulate private-sector investment, according to the Centre.
However, the CPPE warned that persistent food inflation and rising energy costs could undermine the progress recorded in the country’s disinflation drive.
In its September 2026 Inflation Policy Brief released recently in October, the Centre’s Chief Executive Officer, Dr Muda Yusuf, said the latest figures showed improving macroeconomic conditions but highlighted continuing structural challenges affecting households and businesses.
Yusuf noted that annual core inflation declined from 13.29 per cent in August to 12.95 per cent in September, while monthly headline inflation dropped sharply from 0.71 per cent to 0.06 per cent.
He said the moderation in inflation, supported partly by relative stability in the foreign exchange market, had strengthened the prospects for investment, monetary easing and economic recovery.
Interest Rate Cuts to Support Businesses
The CPPE argued that the moderation in inflation had strengthened the case for further reductions in interest rates, given the high cost of borrowing and its impact on productive activities.
According to the Centre, elevated lending rates have constrained manufacturing, agriculture, construction, distributive trade and micro, small and medium-sized enterprises (MSMEs).
It maintained that a sustained reduction in borrowing costs would improve access to credit, ease working-capital pressures and encourage private-sector investment.
The Centre, however, cautioned that monetary easing must be carefully managed in line with inflation expectations, exchange-rate conditions and emerging energy-price risks.
It added that the Central Bank of Nigeria’s September reduction of the Monetary Policy Rate by 350 basis points to 23 per cent provided a foundation for further easing, although the impact on commercial lending rates might take time to materialise.
Food Inflation Remains a Concern
Despite the decline in headline inflation, the CPPE expressed concern over food inflation, which edged up from 19.57 per cent in August to 19.59 per cent in September.
The rate was 4.96 percentage points above headline inflation, underscoring the disproportionate burden of rising food prices on low-income households.
Yusuf warned that persistent food inflation eroded household purchasing power, increased poverty risks and weakened consumer demand.
He explained that as households devoted more of their income to food, spending on manufactured goods, education, healthcare and other services declined, creating additional pressures for businesses.
The Centre attributed the persistent pressure on food prices to insecurity in farming communities, inadequate rural infrastructure, high logistics costs, post-harvest losses and inefficient agricultural distribution networks.
It called for targeted interventions to improve agricultural productivity and food distribution rather than relying predominantly on monetary tightening to contain inflation.
Energy Costs Threaten Inflation Gains
The CPPE also identified rising energy costs as a major risk to the inflation outlook.
According to the report, monthly energy inflation surged from 0.36 per cent in August to 5.38 per cent in September, while year-on-year energy inflation stood at 10.85 per cent.
The Centre warned that rising petrol, diesel and gas prices could increase transportation, distribution and production costs, with further implications for food prices and core inflation.
It noted that geopolitical tensions in the Middle East had heightened volatility in international petroleum markets, exposing Nigeria to external energy-price shocks.
While acknowledging that exchange-rate stability could moderate imported inflation, the CPPE said it could not completely offset the impact of rising global energy prices.
To address the challenge, the Centre urged the government to improve electricity supply, expand compressed natural gas (CNG) infrastructure, promote electric mobility and strengthen domestic refining efficiency.
It said reducing the economy’s dependence on expensive and volatile energy sources was critical to achieving sustainable price stability.
Regional Disparities Highlight Infrastructure Gaps
The report also highlighted geographical differences in inflation, noting that urban inflation exceeded rural inflation by 3.18 percentage points.
According to the CPPE, the disparity reflected differences in logistics costs, market access, local supply conditions and consumption patterns.
The Centre called for increased investment in rural feeder roads, storage facilities, transport infrastructure and agricultural market connectivity to reduce distribution costs.
It also urged state and local governments to strengthen security, improve market access and coordinate efforts to address structural barriers to the movement of goods across states.
CPPE Lists Policy Priorities
The Centre recommended a balanced approach to inflation management, combining prudent monetary easing with reforms to address supply-side constraints.
Its recommendations include improving food affordability through better agricultural security and productivity, reducing energy costs, strengthening logistics infrastructure and eliminating multiple levies and checkpoints that increase the cost of moving goods.
It also called for monetary and trade policies that would ease supply constraints affecting agriculture, agribusiness and manufacturing.
The CPPE said businesses should distinguish between declining inflation and falling operating costs, noting that although slower inflation could improve economic predictability, persistent energy and logistics expenses could continue to undermine profitability and competitiveness.
In its conclusion, the Centre acknowledged that the September inflation figures indicated progress in macroeconomic stabilisation but warned that the gains remained fragile.
It cited annual food inflation of 19.59 per cent, rising monthly energy inflation and an increase in monthly core inflation from -0.06 per cent in August to 1.11 per cent in September as evidence of continuing price pressures.
The CPPE stressed that sustaining the disinflation trend would require coordinated action by the federal, state and local governments, with greater emphasis on productivity, infrastructure, security, energy efficiency and domestic supply capacity.
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