Election Spending to Shape Nigeria’s Inflation Rate in 2026
Nigeria’s election spending is projected to shift Nigeria’s annual inflation gear, with investment banking firm Cowry Asset Limited projecting the headline rate to trend between 17.8% and 18.7% range in 2026.
The inflation rate projection is anchored on election-related spending pressures and diminishing base effects, even as structural reforms continue to shape the medium disinflation path.
Nigeria is one year away from the presidential election, according to the Independent National Electoral Commission calendar. The penultimate year often witnesses a significant flow of money from the political class, which is expected to distort pricing due to an increase in money supply.
Too much money is anticipated to chase too few goods as political elites begin to buy the heart and soul of a battalion of impoverished electorates across 36 states and the Federal Capital Territory.
The outrageous cost of elections has been a challenge, and even more challenging are efforts to effectively monitor candidates’ election expenses, making it almost impossible to identify and prosecute offenders, according to Policy and Legal Advocacy Centre, Abuja.
Noting that uncertainties have clouded Nigeria’s headline inflation outlook, analysts anticipate a rise in the January figure following the consumer price index (CPI) normalisation.
The National Bureau of Statistics (NGX) adjusted its methodology for inflation rate calculation in December, which returned a headline figure to 15.15%, tracking significantly below market expectations at the time.
Nigeria’s headline inflation decelerated steadily in 2025, closing the year at 15.15% in December, while the annual average eased by 9.85 percentage points to 23.33%, from 33.18% in 2024, Cowry Asset Management Limited research subsidiary, said in a report.
Research analysts explained that the sharp moderation was largely driven by base effects following the recent normalisation of CPI computation by the National Bureau of Statistics.
“Beyond methodology effects, tighter monetary conditions played a key role”, Cowry Asset said, highlighting that the monetary authority has maintained policy tightening that kept the benchmark interest rate at double digit high.
According to Cowry Asset, the Central Bank of Nigeria maintained a restrictive stance, with the policy rate held at 27% as of September 2025, down slightly from 27.50% at the start of the year, reinforcing efforts to contain entrenched inflationary pressures.
Complementing this, the naira appreciated meaningfully across FX windows.
NBS Consumer price index revealed that headline inflation moderated further in December 2025, and reflects easing cost pressures, reduced pass-through from earlier shocks, and favourable base effects.
“Food inflation saw a particularly sharp slowdown, falling to 10.84% year-on-year from 39.84% a year earlier, while month-on-month food prices declined by 0.36%, driven by lower prices of staples such as tomatoes, garri, eggs, vegetables, beans, and grains.
“Core inflation followed a similar path. Year-on-year, it slowed to 18.63% from 29.28% in December 2024, while month-on-month growth eased to 0.58% from 1.28% in November, pointing to softer short-term cost pressures outside food and energy”.
Although the December Food Price Watch report is yet to be released, the investment firm said a review of the November data shows the 27 food items tracked recorded average price increases of just 1.79%, down sharply from 7.62% in October, reinforcing evidence of improving supply conditions aided by harvest gains, lower energy prices, and relative FX stability.
Analysts noted that energy-related costs also moderated. Average diesel and PMS prices declined by 3.2% year-on-year and 11.8% year-on-year to N1,401.63/litre and N1,048.63/litre, respectively, while the average cost of refilling a 12.5kg cooking gas cylinder fell sharply from N17,274.16 to N13,438.90, reflecting improved supply and availability.
However, transport costs remain a clear outlier with persistent double-digit increases across all transport categories.
The recent CPI normalisation has created a lower base for January 2026 comparisons, suggesting a likely temporary uptick in headline inflation in January and possibly February, Cowry Asset said.
“Consistent with our 2026 outlook, we project Nigeria’s annual inflation to trend within the 17.8% -18.7% range, driven by election-related spending pressures and diminishing base effects, even as structural reforms continue to shape the medium disinflation path”, the firm stated. CBN Approves $150k Weekly FX Sales to Licensed BDC
The post Election Spending to Shape Nigeria’s Inflation Rate in 2026 appeared first on MarketForces Africa.