CBN warns Middle East tensions, election spending could disrupt disinflation

The Central Bank of Nigeria (CBN) expected Nigeria’s inflation rate to moderate further in the short- to medium-term. Still, it warned that prolonged geopolitical tensions in the Middle East and election-related spending could put renewed pressure on prices in Nigeria.

The projection was contained in the communiqué of the 307th meeting of the Monetary Policy Committee (MPC), which noted the continued decline in headline, food and core inflation.

The apex bank said Nigeria’s inflation rate is expected to moderate further in the short- to medium-term as improved food supply during the harvest season combines with foreign exchange stability and the delayed effects of previous monetary tightening.

Headline inflation slowed to 15.39 per cent in August 2026 from 15.43 per cent in July, while food inflation declined to 19.57 per cent from 20.31 per cent over the same period.

Core inflation also moderated to 13.92 per cent in August from 14.97 per cent in July.

CBN said the moderation in inflation reflected the impact of previous monetary policy tightening, sustained exchange-rate stability and improved inflation expectations.

It also identified improved food supply as a factor that could support further disinflation.

“Inflation is projected to moderate further in the short to medium term, underpinned by stability in the foreign exchange market, the lagged impact of earlier monetary policy tightening, and expectations of improved food supply as the harvest season progresses,” CBN Governor Olayemi Cardoso said, after the MPC meeting.

CBN said that although the outlook for the domestic economy remained positive, external and domestic risks could undermine the moderation in inflation.

“Overall, the outlook for the domestic economy remains positive, although prolonged geopolitical tensions in the Middle East and election-related spending could present upside risks to price development,” the apex bank said.

The United States and Israel have sustained conflict with Iran, which started in February, with recent US and Israeli strikes on Iran followed by Iranian retaliatory attacks. The conflict has also affected energy supplies and regional security.

Recently, fighting between Saudi Arabia and Yemen’s Houthis also intensified, with the sides exchanging attacks. The tension disrupts the constant flow of oil in the oil-producing region, which could contribute to further increases in global oil prices.

Nigeria’s 2027 general election is scheduled to be held around early 2027, amid tightened interest and election-related spending.

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The CBN warned that global inflation risks remained tilted to the upside due to persistent supply chain disruptions, elevated crude oil and other commodity prices, and increasing trade fragmentation.

The apex bank said these pressures, combined with the possibility of renewed geopolitical tensions, could delay the normalisation of monetary policy globally.

The warning comes as Nigeria’s economy continues to expand, with real GDP growth accelerating to 4.43 per cent in the second quarter of 2026 from 3.89 per cent in the first quarter.

The non-oil sector grew by 4.31 per cent, while oil-sector growth accelerated to 7.31 per cent in the second quarter.

CBN said domestic output growth was expected to remain resilient for the rest of 2026, supported by improved crude oil production, agriculture and other business activities.