Nigeria’s headline inflation is projected to rise to 16.73 per cent in January 2026, marking what analysts expect to be the highest level this year before a steady decline toward single digits.
The forecast, released by United Capital Research on Monday, represents an increase from 15.15 per cent recorded in December 2025 by the National Bureau of Statistics (NBS).
It described the anticipated rise in January as largely driven by base effects from the previous year rather than a fresh surge in current prices.
Food prices moderate
According to the report, despite the projected increase in the headline rate, market data show that prices of several key food items declined in January.
Average rice prices fell by three per cent, beans dropped by 6.5 per cent, and tomatoes declined by 15.25 per cent, while the prices of garri, maize and sorghum remained broadly stable during the month.
United Capital Research attributed the moderation in prices partly to the appreciation of the naira, which strengthened by 3.55 per cent against the United States dollar to close January at ₦1,387/$1.
It shows that the stronger currency helped offset a 6.17 per cent rise in global crude oil prices, keeping domestic fuel costs largely stable.
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Market competition between Dangote Refinery and major fuel marketers also supported price stability, it added.
Path to single-digit inflation
United Capital Research stated that it expects inflation to begin a gradual decline from February and fall into single digits by May this year.
“January will record the highest inflation rate of 2026,” the report stated, noting that inflation is expected to remain in double digits only until April.
It said the anticipated moderation reflects easing exchange rate pressures, stable food prices and improved supply conditions.
Focus on MPC decision
Attention has shifted to the Central Bank of Nigeria’s Monetary Policy Committee (MPC), scheduled to meet on February 23–24.
While the improving inflation outlook may support a rate cut, United Capital Research believes the committee could maintain current rates to manage liquidity and protect the naira’s recent gains.
It said the decision is expected to shape market direction in the coming months.
Fixed-income market outlook
According to the United Capital Research, cooling inflation is expected to drive lower yields in the fixed-income market.
It is projected that increased investor demand for bonds and treasury instruments will be supported by improved macroeconomic confidence.
If inflation falls into single digits as projected, investors could begin to earn positive real returns, even if nominal interest rates are reduced.
Equity market prospects
The United Capital Research also noted in its report that the equity market is expected to benefit from the improving inflation outlook.
It stated that lower fixed-income yields may trigger portfolio rebalancing in favour of equities, while stronger corporate earnings and improved operating conditions could support market gains.
The report maintained that market sentiment remains positive, noting that a transition to single-digit inflation could reshape asset allocation decisions and boost investor confidence.
The United Capital Research added that January’s projected inflation spike is seen as temporary, with expectations of sustained moderation likely to support both macroeconomic stability and financial market performance in 2026.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
