Food prices drive Nigeria's inflation rise, limiting CBN rate cuts in 2026
Nigeria's headline inflation eased slightly to 15.91% year-on-year in June, down from 15.93% in May, with month-on-month inflation at 1.66% (down from 1.75%). However, food prices surged: monthly food inflation rose to 3.75% from 2.98%, and farm produce prices jumped 4.42% month-on-month after a modest 0.86% rise in May. Farm produce makes up about 95% of the food basket and 26.6% of the overall CPI, contributing 1.18 percentage points to June's 1.66% monthly inflation - roughly 71% of the total. Analysts at Zrosk Equity Research call this a genuine agricultural supply shock that conventional monetary tools cannot curb, warning that if farm-produce inflation stays high in July, headline inflation could remain above 1.5% month-on-month regardless of energy prices or exchange-rate stability. They argue that conventional rate hikes will only curb demand-driven inflation, while food prices need supply-side fixes such as better farm output, storage and distribution. Standard Chartered forecasts the CBN will cut rates by only 150 basis points in 2026, leaving the MPR at 25% year-end and raising its 2026 average inflation forecast to 15.5% from an earlier 12%. For households, this means limited relief from interest-rate cuts and continued pressure on food budgets, suggesting a need to adjust spending, explore agro-investments, or seek inflation-hedged assets.