June inflation eases slightly as food prices complicate MPC decision

By AYODEJI EBO

The National Bureau of Statistics released the June 2026 inflation report last week, and the figures indicate a slight improvement in headline inflation after three consecutive months of increase. Headline inflation eased to 15.91 per cent year-on-year in June, down from 15.93 per cent in May 2026. On a month-on-month basis, inflation also eased to 1.66 per cent from 1.75 per cent in May, meaning prices still rose in June but at a slightly slower pace.

The Consumer Price Index also rose to 143.0 from 140.7, confirming that the general price level is still rising, although the pace has moderated. The key message is that inflation is no longer rising aggressively, but it is also not falling strongly. Since the beginning of the year, headline inflation has remained in the 15-per-cent to 16-per-cent range, suggesting it is becoming sticky. For households to feel stronger relief, Nigeria will need more consistent improvement in food supply, exchange-rate stability and energy costs.

Food inflation remains the biggest concern. In June 2026, food inflation stood at 17.5 per cent year-on-year, while month-on-month food inflation rose to 3.75 per cent, up from 2.98 per cent in May. This indicates that food prices rose faster in June than in May, despite a slight moderation in headline inflation. The increase was driven by higher prices for items such as crayfish, fresh pepper, tomatoes, yam flour, water yam, beef, banana, cassava flour, cowpea, garri, Irish potatoes and yam tuber.

This is important because food accounts for a large share (about 60 per cent) of household spending. So even when headline inflation declines slightly, many households may still feel pressure if food prices continue to rise.

Core inflation, which excludes volatile farm produce and energy, stood at 15.9 per cent year-on-year in June. On a month-on-month basis, core inflation eased to 1.7 per cent, down from 1.9 per cent in May, suggesting that underlying price pressures outside food and energy have moderated. This is a positive signal, as it shows some cooling in broader goods and services prices.

Looking at the major contributors to headline inflation, food and non-alcoholic beverages remained the largest contributor at 6.3 per cent, followed by restaurants and accommodation services, transport, housing and utilities, education and health. This confirms that inflationary pressure remains concentrated on essential consumption items that households cannot easily avoid.

Urban inflation was 16.1 per cent year-on-year, higher than rural inflation at 15.5 per cent. On a month-on-month basis, urban inflation rose slightly to 2.1 per cent, while rural inflation slowed to 0.5 per cent. This suggests that price pressures in cities remained stronger, likely reflecting higher transport, housing, services and lifestyle-related costs. One useful insight from the subindices is the sharp month-on-month decline in energy prices. Energy inflation fell by 7.5 per cent in June, compared with a 0.7 per cent increase in May. This likely helped to moderate the headline inflation figure. However, farm-produce inflation rose to 4.4 per cent, up from 0.9 per cent in May, indicating that food-related pressure remains the main risk. Services inflation also eased, while imported food inflation moderated to 1.7 per cent, down from 2.3 per cent in May.

At the state level, inflation remained uneven. The highest year-on-year headline inflation was recorded in Niger, Kogi and Abuja, while Imo, Ebonyi and Katsina recorded the slowest increases. For food inflation, Kogi, Niger and Benue recorded the highest year-on-year rates.

Overall, the June inflation report indicates a fragile improvement. Headline inflation eased slightly, core inflation moderated, and energy prices fell sharply month-on-month. However, food inflation accelerated, and this remains the biggest concern for households and policymakers. July inflation may ease slightly if the energy-price relief continues, but the upside risk remains food inflation, especially as food prices rose faster month-on-month in June despite the moderation in headline inflation.

Ahead of MPC: Why a rate hold looks more likely

Ahead of the CBN’s Monetary Policy Committee meeting next week, the June inflation figures give the committee reason to remain cautious. Although headline inflation eased slightly, food inflation remains elevated and exchange-rate pressure has re-emerged in recent weeks. At the last MPC meeting in May, the CBN kept the Monetary Policy Rate at 26.5 per cent, following a 50-basis-point reduction in February. Given the current data, we expect the MPC to hold rates at the current level rather than cut immediately. A rate cut at this point may be premature, especially if the CBN aims to sustain foreign portfolio inflows, support naira stability and ensure inflation declines more convincingly.

Investment strategies to hedge against inflation

From an investment perspective, investors should remain disciplined. Since inflation remains above most savings returns, idle cash should be deployed into instruments that preserve purchasing power. Treasury bills, FGN bonds and high-quality commercial paper remain attractive, especially while yields are still relatively high.

Investors should also maintain some currency diversification but avoid excessive dollar exposure if it does not align with their goals. In equities, the focus should remain on quality companies with strong earnings, pricing power and solid balance sheets, particularly in banking, telecommunications, energy, cement and essential consumer goods.

•Dr. Ebo, Principal Consultant, MDU Consulting Limited, writes from Lagos.

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