This development is significant for Nigeria's broader macro outlook, given the central role of food inflation in driving headline inflation, constraining policy flexibility and shaping risk sentiment across currency and local asset markets. Headline inflation also eased to 14.45 % in November 2025, marking the eighth consecutive monthly decline and the lowest annual rate in several years.

"This is important because food inflation has been the core source of pressure in Nigeria's inflation story," said David Barrett, Chief Executive at EBC Financial Group (UK) Ltd.

Food Price Pressures Begin to Ease

The moderation in food inflation reflects improving supply dynamics across key staples, supported by harvest inflows and better market availability, which have helped temper price pressure compared with previous months. Food inflation at 11.08 % in November 2025 marked another year-on-year decline from earlier in 2025, part of a five-month consecutive slowdown. In addition to the annual slowdown, food prices rose 1.13 % on a month-on-month basis in November 2025, compared with a –0.37 % month-on-month change in October 2025, indicating that while annual inflation eased, average prices still showed modest increases during the month.

Base effects linked to the CPI rebasing also contribute to lower annual readings, but the persistence of multi-month declines shows genuine relief in inflation momentum rather than a purely mechanical adjustment. "For markets, the key question is whether this easing proves durable," Barrett said. "One or two softer prints are not enough. Persistence is what changes positioning."

Policy Constraints Start to Loosen
Food inflation has long limited Nigeria's policy options, forcing authorities to maintain a defensive monetary stance to anchor inflation expectations. Headline inflation's decline to 14.45 % in November 2025 from 16.05 % in October 2025 reduces upward pressure on overall prices and creates room for more balanced monetary policy deliberations.

Compared with global peers where disinflation has unlocked monetary easing cycles, Nigeria's structural inflation volatility has kept policymakers constrained. A sustained slowdown in food inflation helps anchor expectations and reduces the risk of renewed tightening. "The central bank does not need inflation to fall sharply," Barrett said. "It needs confidence that the trend is turning, and food inflation is central to that confidence."

Markets Remain Cautious but Alert
Market reaction has so far been restrained. The naira continues to reflect broader liquidity and capital flow dynamics, while local bond yields still embed a premium for inflation uncertainty. Equity markets have shown selective interest, particularly in consumer-related sectors, but positioning remains cautious amid lingering risks. The improved inflation profile, including the eighth consecutive monthly decline in headline inflation, has been highlighted in economic commentary.

This apparent calm masks ongoing reassessment beneath the surface, with investors watching closely to see whether easing food inflation feeds into broader disinflation or stalls once seasonal effects fade. "Quiet markets do not mean inactive markets," Barrett said. "Positioning is adjusting as investors test whether this shift is real."

Outlook: What Traders Should Watch Next
Looking ahead, the durability of food inflation relief will be the key driver of Nigeria's macro and market outlook over the next 6 to 18 months. Traders should monitor post-harvest price behaviour, supply chain stability, and the impact of exchange-rate movements on imported food costs and production inputs. Policy communication will be critical. Even subtle changes in tone around inflation risks, liquidity management, or growth priorities could prompt repricing across FX and rates. External factors, including shifts in global monetary conditions and emerging-market risk appetite, will also shape capital flows and domestic liquidity dynamics. "The risk is assuming the adjustment is complete," Barrett said. "If food inflation continues to ease, markets may have to reprice more quickly than expected."

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