By James Emejo

Nigeria’s inflation rate continued its downward trend in October, dropping to 16.05 percent from 18.02 percent recorded in September 2025. According to the National Bureau of Statistics, this easing reflects the combined impact of the Central Bank of Nigeria’s recent monetary tightening cycle and broader structural reforms that have helped stabilise the foreign exchange market and lift external reserves to 46.7 billion dollars.

CBN Governor Olayemi Cardoso said the reforms have made the naira more competitive and are gradually improving investor confidence across key sectors. Speaking after the Monetary Policy Committee’s final meeting of the year in Abuja, he explained that the gains were a direct result of policy coordination and a return to “disciplined monetary management”.

Monetary Policy Holds Course

At the November meeting, the Monetary Policy Committee kept the Monetary Policy Rate unchanged at 27 percent. The committee also retained the Cash Reserve Ratio for deposit money banks at 45 percent, merchant banks at 16 percent, and 75 percent for non-TSA public sector deposits. The Liquidity Ratio remained at 30 percent.

However, the standing facilities corridor around the MPR was adjusted to +50 and -450 basis points. Cardoso said the decision was guided by the need to consolidate progress on inflation, which the bank expects to continue moderating in the months ahead.

He added that lower lending rates were beginning to emerge, especially among large corporates, as improved FX liquidity reduced funding pressures on banks.

The CBN also stressed the need for close alignment with fiscal authorities, especially as digital finance and technological innovation reshape financial markets.

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Inflation Data Shows Broad Improvement

The NBS Consumer Price Index for October confirmed a sustained improvement in inflation dynamics. On a year-on-year basis, headline inflation dropped by 17.82 percentage points compared with October 2024, when the rate stood at 33.88 percent.

Although month-on-month inflation rose slightly to 0.93 percent from 0.72 percent in September, analysts interpret the shift as a reflection of seasonal price adjustments rather than a reversal of the broader disinflation trend.

Economists say the cooling inflation, a firmer naira and stronger foreign reserves are reinforcing Nigeria’s improving macroeconomic outlook.

The IMF recently projected that Nigeria will record 3.9 percent GDP growth in 2025, citing FX stability, structural reforms and a gradual rebound in domestic production.

Naira Records Modest Strengthening

The naira has gained about 3.5 percent against the US dollar over the past ten months. It traded at roughly 1,555 naira per dollar in January before briefly weakening to 1,597 naira in late April. Intense FX market interventions over the following months helped the naira appreciate to around 1,475 naira in October on the official window, while settling at 1,500 naira at the parallel market this week.

Cardoso, speaking at the G-24 briefing during the IMF/World Bank Annual Meetings in Washington, said the currency had “turned the corner” after years of volatility. He argued that the Nigerian economy had been restructured in ways that created buffers against global shocks and reduced exposure to external risks.

According to him, the country is now recording a trade surplus projected to reach six percent of GDP, driven partly by the shift from imports to locally produced goods.

He noted that only oil exports were significantly affected by recent global tariff adjustments, and even that impact remained modest.

Expert Views on Nigeria’s Economic Trajectory

Dr. Baba Musa, Director-General of the West African Institute for Financial and Economic Management and President of the Nigerian Economic Society, said Nigeria’s recovery narrative is “encouraging but still fragile”. Presenting his outlook at the IMF/World Bank Meetings, he noted that while the country is regaining stability, policy makers must ensure that projected growth translates into jobs, rising incomes and broader welfare gains.

He highlighted the IMF’s forecast of 3.9 percent GDP growth in 2025 and 4.2 percent in 2026, adding that improved oil output, stronger telecommunications and financial services, and better agricultural performance are expected to drive expansion.

Musa explained that Nigeria’s recent GDP rebasing has brought to light fast-growing sectors such as digital services, modular refining and the creative industries. According to him, these areas could become major engines of job creation and innovation if supported with the right policies.

He also pointed to the approval of Shell’s HI Offshore Gas Project, expected to deliver 350 million standard cubic feet of gas daily to Nigeria LNG, as a sign of strengthening investor sentiment.

FX Reforms Continue to Expand Dollar Supply

To widen FX supply channels, the CBN under Cardoso has rolled out several initiatives, including new guidelines for diaspora remittances, licensing of additional International Money Transfer Operators and the expansion of a willing buyer-willing seller FX model. The central bank has also improved naira liquidity for IMTOs and simplified processes for authorised dealers.

Analysts say these measures are gradually boosting FX inflows and easing pressure on the currency.

Outlook

Nigeria is entering 2026 with stronger buffers, improved FX stability and clear signs of macroeconomic recovery. Economists, however, caution that reform momentum must be maintained. Fiscal authorities are expected to intensify efforts to raise FX earnings, especially from oil, gas and non-oil exports.

For now, the combination of slowing inflation, rising reserves and a more competitive currency suggests that Nigeria’s policy reset is beginning to pay off.