Nigerian inflation is expected to show a further moderation as the June CPI numbers. This comes as Nigerian stocks advanced to a record high backed by an improving economic outlook for the West African nation.

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Nigeria is expected to see a continued moderation in inflation, with projections indicating a decrease from previous levels and an average of around 21.5 percent for the remainder of the year. This trend is attributed to stable food prices, a steady naira, and favorable base effects. The Nigerian stock market has reached record highs, driven by strong earnings in key sectors, reduced currency risk, and a shift from bonds to equities.

Despite global concerns over tariffs, Nigeria remains largely insulated due to its export composition, with most exports to the U.S. being oil, which is exempt from recent tariffs. However, the country's reliance on oil exports poses a risk if global demand slows, potentially impacting fiscal stability. Investors remain cautiously optimistic, encouraged by ongoing reforms and economic growth prospects.

Why Nigeria may be insulated against tariffs

Let's just start with the upcoming CPI print expectations as we are going to see a little bit of a drop from the prior month. Where do you see inflation not just coming in for this print but more broadly landing for the latter half of this year. Great. Thank you for having me on. Definitely we're we're likely to see inflation inflation prints come down from the 23 percent level last month for this month. But certainly for the remainder of the year we expect inflation to hover around 21.5 percent on aggregate. And this is of course on the back of base effects of course relatively contained in the prices of seasonal harvests. And of course this is all tempering food price pressures. And we can't discount the stability the broad stability that we've seen in the Naira lately which would have actually limited import price pressures. Yeah I mean obviously the trends lower and inflation is welcome for investors and it's being reflected in financial asset performance. But at what point do you think the central bank will actually be incentivized to start cutting i.e. what level of CPI would be consistent with the beginning of the easing cycle. I think when we certainly get closer to that 21 percent level but in terms of the time estimate we're looking at more in the Q3 going into Q4 where we'll start to see the central bank incentivized to cut. We're looking at us to the tune of around 200 basis points going into 2026. So I mentioned the impact that this is having on maybe investor sentiment also stock market performance as well. The Nigerian stock market is at a record high an all time record high. What do you make of this recent rally. I think some of the bullishness that we're seeing in equities markets has certainly been driven by the strong earnings especially from the leading banks telecoms and some consumer facing sectors as well as industrials. Of course the second key factors this reduced element of currency risk and of course with increased currency stability we're seeing increasing positive sentiment from both local and foreign investors. We can't discount the third main element which has been the lower returns that we've seen in the bond market. So this is of course driving a further rotation into equities. But of course looking ahead the outlook does remain cautiously optimistic. Yes investors are encouraged by the government's reform agenda by the potential for future growth in key sectors and of course the broader economy. But there's still persistent challenges such as global economic uncertainties. Of course still high inflation. Yeah. Well above the 20 percent mark. And of course security risks. Yeah. You mentioned some of the global macro uncertainties. Why are Nigerian financial assets somewhat immune to the conversations that the world is having around tariffs and the impact that tariffs could have on countries. Why. Why have investors brushed off some of those concerns. I think on the tariff front in terms of the direct channels Nigeria is quite broadly insulated only about 10 percent of its exports from 2024 data actually went to the United States of which over 90 percent of those are oil exports. And as we know sort of oil segment is exempt from reciprocal tariffs. So while the Trump administration on April 2 announced the 14 percent tariff rate you know the effective tariff rate for Nigeria ends up only being around 0.2 percent for U.S. bound exports. So it really does stand out as one of the major markets in the region that's most insulated from tariffs. But I want to highlight that there is an indirect second order channel that we have to consider given the fact that Nigeria's export basket is quite undiversified very oil reliance to a slowdown in global growth drop off in sort of global oil demand will then result in sort of downward price pressures on the oil front. And of course it's a way on growth. This will weigh on the fiscal dynamics in Nigeria especially as the latest budget has an oil price assumption of around 70 dollars a barrel. Yeah.

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Why Nigeria may be insulated against tariffs

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