Inflation falls, but food prices keep rising — Economists explain why

Nigeria’s headline inflation rate fell for the second consecutive month in July 2026, dropping to 15.43 percent from 15.91 percent in June. But rather than bringing immediate relief to households, the latest figures have exposed a growing disconnect between the headline inflation trend and the daily reality of millions of Nigerians.

The decline was contained in the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) on Monday.

According to the NBS, month-on-month headline inflation stood at 1.57 percent in July, down from 1.66 percent in June, representing a 0.09 percentage-point decline.

On a year-on-year basis, Adamawa State recorded the highest all-items inflation rate at 33.03 percent, while Nasarawa State posted the lowest at 7.86 percent.

Despite the moderation in headline inflation, however, food inflation moved in the opposite direction, rising for the sixth consecutive month to 20.31 percent from 17.52 percent.

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The NBS attributed the increase in food inflation to higher average prices of commodities including crayfish, fresh pepper, onions, carrots, rice, water yam, tomatoes, garri, plantain, beef, eggs, guinea corn, ginger and plantain flour, among others.

Adamawa also recorded the highest state-level food inflation at 51.36 percent, while Nasarawa recorded the lowest at 6.88 percent.

Why lower inflation has not translated into cheaper food

Economists and financial analysts who assessed the July inflation figures said the latest data should not be interpreted as evidence that the cost of living has fallen.

They explained that disinflation — a slowdown in the rate at which prices are rising — is fundamentally different from deflation, which occurs when prices actually decline.

Prof. Godwin Oyedokun, Professor of Accounting, said the second consecutive decline in headline inflation was encouraging from a macroeconomic perspective, but warned that it should not be confused with an improvement in household welfare.

According to him, the moderation in inflation could be linked to relative exchange-rate stability, tight monetary policy, easing core inflation and favourable base effects, rather than a broad reduction in the prices of goods and services.

“Nigeria’s second consecutive decline in headline inflation to 15.43 percent in July is a positive sign of emerging macroeconomic stability, but it should not be mistaken for a fall in the cost of living,” he said.

Oyedokun noted that food and other essential household expenses remained elevated, meaning many Nigerians were yet to feel any meaningful benefit from the lower headline inflation rate

“In economic terms, prices are rising more slowly, not falling,” he explained, stressing that the real test would be whether the trend could be sustained while food prices moderate, purchasing power improves and wages begin to catch up with the elevated cost of living.

‘Nigeria’s real inflation is much higher’

Former President of the Chartered Institute of Bankers of Nigeria, Dr Okechukwu Unegbu, questioned whether the official inflation rate adequately captured the experience of ordinary Nigerians.

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Unegbu argued that inflation, as experienced by households, should be assessed against the actual prices people encounter in markets and other points of transaction.

He estimated Nigeria’s effective inflation rate at between 35 and 40 percent, substantially above the NBS headline figure.

“For me, the inflation that is dropping is neither here nor there. It doesn’t make sense to me,” he said.

Unegbu argued that an improvement in inflation should ultimately be reflected in the prices consumers pay.

“If inflation drops in society, it will reflect on the general public,” he said, pointing to the persistent increase in the prices of basic food items as evidence that Nigerians were yet to experience meaningful relief.

He maintained that his own assessment continued to show that inflation remained significantly high despite the decline recorded in the official statistics.

Exchange-rate stability offers some relief

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, offered a more positive interpretation of the latest figures, linking the moderation in headline inflation largely to improved macroeconomic stability.

According to Yusuf, relative stability in the foreign exchange market has helped strengthen investor confidence and moderate inflation expectations.

“The marginal drop in inflation rate is perhaps a reflection of the sustained macroeconomic stability, particularly around the exchange rate,” he said.

Yusuf noted that the relative stability and occasional appreciation of the naira had had positive implications for investment and business confidence, while also helping to reduce expectations of further price increases.

However, he stressed that the improvement in macroeconomic indicators had not eliminated the pressures confronting households.

“The cost-of-living issues are still there because the key drivers of the cost of living are still major pressure points as far as inflationary pressure is concerned,” he said.

Food, transport and energy remain major pressure points

Yusuf identified food, transportation, energy and utilities as the major areas continuing to put pressure on household budgets.

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He said these sectors have a disproportionate impact on ordinary Nigerians, particularly low- and middle-income households whose incomes have not increased sufficiently to match the accumulated rise in prices.

“That is why the ordinary citizen still continues to be very vulnerable, even with the deceleration or even with the disinflation that we are recording,” he said.

The CPPE chief executive called for stronger fiscal interventions by both the Federal Government and state governments to address structural pressures driving the cost of living.

He said interventions should focus particularly on food production and distribution, transportation costs, energy prices and utility charges.

The bigger issue: purchasing power

The July inflation figures therefore present a mixed picture for the Nigerian economy.

On one hand, the decline in headline inflation suggests that some of the intense macroeconomic pressures experienced in previous months may be easing. Exchange-rate stability and tighter monetary conditions appear to be contributing to a slower pace of overall price increases.

This explains why a fall in the headline inflation rate can occur at the same time that Nigerians continue to complain about rising prices.

With food inflation now at 20.31 percent and Adamawa recording food inflation above 50 percent, analysts say the sustainability of the current disinflationary trend will ultimately depend on whether the government can address the structural factors pushing up the cost of food and essential services.

For millions of Nigerians, the real measure of economic recovery will not simply be whether the inflation rate falls further, but whether wages begin to buy more, food prices stabilise and the cost of essential household needs becomes more manageable.