Nigeria: Nigeria Inflation Quickens As Middle East War Drives Fuel Costs

Nigeria's inflation rate rose less than expected in May, strengthening the case for possible interest-rate cuts later this year if global energy prices keep falling. Consumer prices increased 15.9% from a year earlier, compared with 15.7% in April, the National Bureau of Statistics said.

The reading was below the 16.2% median estimate in a Bloomberg survey of 5 economists. Prices rose 1.7% month-on-month.

The data come after the US and Iran agreed to extend an interim peace deal and reopen the Strait of Hormuz, a key route for oil, liquefied natural gas and fertiliser shipments. Brent crude fell more than 5% to about $83 a barrel after the truce was announced.

Lower oil and fertiliser prices could ease inflation pressure in Nigeria in the coming months. The Central Bank of Nigeria held its benchmark rate at 26.5% in May as policymakers assessed the impact of the war on prices. The next rate decision is scheduled for July 21.

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Still, underlying price pressure remains a concern. Core inflation rose to 16.8% from 15.9%, while food inflation increased to 16.96% from 16.1%. Governor Olayemi Cardoso said in May that the economy remained strong enough to support a return to disinflation.

Key Takeaways

Nigeria's May inflation data gives the central bank room to wait, but not yet a clear signal to cut rates. Headline inflation came in below expectations, and lower oil prices after the reopening of the Strait of Hormuz could help reduce transport, food and import costs. That supports the argument that disinflation may resume later this year. But the details are less comfortable. Core inflation and food inflation both rose, showing that price pressure is still broad. Food matters most for households, while core inflation tells policymakers whether higher costs are spreading beyond energy and farm produce. The central bank also has to protect the naira and keep foreign investors confident after holding rates at 26.5%. A rate cut too early could weaken the currency or slow the return of portfolio inflows. For now, the July decision will depend on oil prices, exchange-rate stability, food supply and whether the May increase proves temporary. If inflation starts falling again, rate cuts could return later in 2026.