Nigeria’s inflation seen rising on fallout from Iran war

Nigeria’s inflation is expected to rise in March ahead of its publication tomorrow, triggered by the escalating United States-Iran war, which has since rippled through global energy markets, analysts surveyed by BusinessDay said.

The projected rise in prices will end the 11th consecutive month of declining inflationary pressures, placing authorities in a difficult position regarding key monetary decisions in May.

Analysts at Cordros Research said in a recent note that headline inflation is expected to rise to 15.4 percent year-on-year in March 2026 from 15.06 percent in February, with renewed pressures from food costs, energy prices, and exchange rate volatility, reversing recent signs of moderation in consumer prices.

On a month-on-month basis, inflation is forecast to rise to 4.2 percent, up from 2.01 percent.

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“Escalating tensions in the Middle East are delivering structural shocks to the Nigerian economy on both the demand and supply sides,” Cordros analysts noted, adding that the impact is already evident in the rising cost of goods and services.

Food prices, which account for a significant share of Nigeria’s Consumer Price Index (CPI), are already showing notable increases. Staple items, including beans, tomatoes, onions, yams, cereals, tubers, and rice, saw price hikes, driven by seasonal planting cycles and heightened demand during the fasting period.

These factors, combined with existing supply constraints, are expected to sustain upward pressure on food inflation.

Separate estimates by analysts at FMDA research also point to an increase in inflationary pressures in March.

In a note seen by BusinessDay, FMDA projects month-on-month inflation at about 4.02 percent, nearly double the 2.01 percent recorded in February, indicating a broad-based increase in prices.

On a year-on-year basis, it expects inflation to edge up to around 15.20 percent, as strong monthly price increases outweigh favourable base effects from the corresponding period in 2025.

Data from the World Bank’s food market survey supports the trend, showing continued increases in domestic food prices.

“Key staples such as yam, gari, rice, and maize recorded higher prices in March, with the food price index rising by 0.86 percent month-on-month, compared to 0.56 percent in February,” the World Bank disclosed.

Energy costs also rose significantly during the month. Average petrol (PMS) prices increased from N1,051.47 in February to between N1,200 and N1,300 in March, reflecting the impact of higher global oil prices. The rise in fuel costs is expected to translate into higher transport and distribution expenses, further amplifying inflation.

Exchange rate dynamics compounded the pressure, with the naira depreciating by 1.80 percent to N1,379.98 per dollar in March, weakening its capacity to absorb imported inflation.

The World Bank also noted that inflation has been moderating across several Sub-Saharan African economies, with median inflation declining to 3.7 percent in 2025 from 4.4 percent in 2024.

However, the trend is expected to reverse in 2026, with inflation projected to rise to 4.8 percent due to spillovers from Middle East tensions before easing again in subsequent years.

“Geopolitical risks arising from the conflict in the Middle East could reverse some of these gains by raising fuel, transportation, and fertiliser costs, thereby exerting upward pressure on food prices,” the bank said.

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Despite the consensus around rising inflation, some analysts hold a more optimistic view. Lukman Otunuga, head of market research at FXTM, expects inflation to ease further to 13.4 percent year-on-year, citing persistent signs of moderating price pressures.

He noted that continued disinflation could create room for monetary easing by the Central Bank of Nigeria, even as global central banks contend with inflationary risks linked to geopolitical developments.