Inflation has remained persistently high in Nigeria. It rose from 7–8% in the mid-2010s to a peak of 35% in 2024 following major policy shocks, notably Premium Motor Spirit (PMS) subsidy removal and exchange-rate liberalisation. Although inflation eased to about 15% by early 2026, it remains volatile and well above the Central Bank of Nigeria’s price stability mandate and its implicit 6–9% reference range (Federal Republic of Nigeria, 2007; Central Bank of Nigeria, 2026), continuing to erode real incomes and complicate macroeconomic policy.

Our empirical model indicates that Nigeria’s inflation is primarily supply driven. Agricultural output is the dominant long-run determinant of prices, reflecting the large food weight in the consumption basket (51.8% during the study period). Monetary expansion and exchange-rate movements play a more limited long-run role, consistent with weak transmission mechanisms, financial repression, and low money velocity. Short-run inflation dynamics are largely driven by discrete shocks, particularly the 2023 reforms.

Sustained disinflation requires structural rather than purely monetary solutions. Improving agricultural productivity, strengthening security in farming areas, reducing logistics and input costs, and expanding storage capacity are central to price stability. Monetary and exchange-rate policy should prioritise credibility and stability, while fiscal policy must reduce fiscal dominance and support productive investment.

Report by the African Development Bank