Nigeria’s headline inflation is expected to surge to 31.92 per cent in December 2025, according to United Capital Research.
The financial services advisory firm made the projection in its ‘Inflation Watch’ report released on Monday, January 12.
The report indicated that the expected surge in headline inflation is expected to be driven largely by statistical adjustments and developments in the energy market.
It, however, stated that inflation will ease sharply in 2026 as policy and cost pressures begin to abate.
According to the research firm, the projected spike in December inflation reflects the rebasing of the Consumer Price Index (CPI) to 100 points in December 2024.
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It noted that while the surge signals heightened price levels, it is partly the result of statistical recalibration rather than a sudden deterioration in underlying economic conditions.
Beyond the CPI rebasing, United Capital pointed out that inflation dynamics in late 2025 were shaped by movements in energy prices and the foreign exchange market.
It noted that the price war in the downstream petroleum sector, driven by competition between the Dangote Refinery and major oil marketers, led to a sharp drop in the retail price of Premium Motor Spirit (PMS) from about N900 per litre in November to ₦785 per litre by the end of December.
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It said the reduction in fuel prices lowered logistics and transportation costs, helping to stabilise food prices, particularly staples such as garri and beans, and easing cost pressures in the transport, hospitality, and food services sectors.
The research firm also noted that currency trends played a role.
Although the naira recorded a marginal average monthly depreciation of about 0.49 per cent, it strengthened toward the end of December, appreciating from ₦1,447 to ₦1,436 against the US dollar.
The report showed that the late-month appreciation helped cushion the inflationary impact of earlier exchange-rate weakness, while savings from lower logistics costs further softened price pressures.
Looking ahead
According to United Capital, headline inflation is expected to moderate significantly in 2026, starting near 20 per cent in January and potentially falling to single-digit levels by year-end.
It stated, “This will be supported by lower food and energy costs, anticipated foreign exchange appreciation, and removal of Value Added Tax (VAT) on selected consumer goods.”
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It believes that as inflation eases, market watchers expect the Central Bank of Nigeria (CBN) to adjust its monetary stance.
It maintained that the apex bank is expected to begin reducing the policy rate in line with the disinflation trend, which could lead to lower yields on fixed-income instruments and reduced prime lending rates.
The research firm added that such a shift is expected to improve financing conditions for businesses, supporting investment, easing interest expenses, and enhancing equity valuations through a lower weighted average cost of capital.
Pinnacle Daily reports that CBN had fixed February to hold its first monetary policy committee (MPC) meeting.
At its November meeting, the committee kept the rate unchanged at 27 per cent.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
