Inflation Slows, Purchasing Power Refuses To Follow

By Enam Obiosio

Nigeria’s headline inflation rate declined marginally to 15.10 percent in January 2026 from 15.15 percent in December 2025, according to the National Bureau of Statistics (NBS) Consumer Price Index (CPI) release. The data also shows a sharp year-on-year decline from 27.61 percent recorded in January 2025.

Yet the statistical easing occurred alongside continued erosion of naira purchasing power, with lower denominations becoming increasingly ineffective in everyday transactions despite improved food supply conditions, a relatively stable exchange rate and moderated petrol prices.

DECISION HIGHLIGHT

Authorities appear to be prioritising disinflation signalling, that is price growth slowing, rather than currency purchasing power restoration, that is real affordability improving.

The policy outcome is therefore a divergence between macro indicators and lived economic experience.

DECISION MEMO

The January inflation figure is technically positive but economically ambiguous. A 0.05 percentage point decline is not a welfare event, it is a statistical direction indicator. The real story lies in what the data does not repair.

Inflation measures the speed of price increases, not the level of prices. When inflation falls from high levels, households do not experience relief, they experience slower deterioration. That distinction now defines Nigeria’s price environment.

The naira’s weakened purchasing power has become the dominant transmission channel of hardship. Even as supply conditions improve, prices remain anchored at elevated nominal levels because currency value determines effective affordability. A currency that buys less neutralises the psychological benefit of lower inflation.

Analysts therefore interpret the easing as disinflation without stabilisation. Production costs, electricity expenses and logistics charges still embed structural price floors into the economy. What the CPI reflects is the slowing of shocks, not the reversal of them.

The year-on-year drop from 27.61 percent to 15.10 percent appears dramatic but mostly captures base effects from last year’s inflation spike rather than a completed price correction cycle. In practical terms, households compare today’s prices with last month’s wages, not last year’s statistics.

This creates a credibility gap between macroeconomic communication and consumer experience. The economy is transitioning from crisis inflation to entrenched high price equilibrium. Policymakers are winning the rate battle but have not yet won the level battle.

The implication is structural, not cyclical. Inflation is decelerating faster than purchasing power is recovering. Until income growth and currency value move together, lower inflation will read as an academic victory and a social non-event.

DATA BOX

January 2026 inflation: 15.10%
December 2025 inflation: 15.15%
Monthly decline: 0.05 percentage points
January 2025 inflation: 27.61%
Year-on-year change: −12.51 percentage points

WHO WINS / WHO LOSES

Winners
Government macro credibility narrative
Financial markets favouring disinflation signals
Borrowers benefiting from stabilising price expectations

Losers
Salary earners facing unchanged real purchasing power
Informal sector consumers transacting in cash
Small businesses whose costs remain nominally high

POLICY SIGNALS

Authorities appear to be entering a stabilisation phase where inflation management replaces emergency tightening. The challenge shifts from suppressing price acceleration to restoring currency value and real income.

INVESTOR SIGNAL

The data indicates improving macro stability but incomplete consumption recovery. Investors may interpret this as favourable for fixed income stability but neutral for consumer demand expansion.

RISK RADAR

Perception risk, statistical improvement without welfare improvement may weaken policy credibility
Income risk, wage growth lagging price levels
Currency risk, continued naira weakness offsetting disinflation
Demand risk, consumption remaining structurally depressed despite lower inflation