Why an 18% Return Can Beat Inflation in Abia but Fail in Lagos

Nigeria’s headline inflation fell for the third straight month to 15.39% in August, down from 15.43% in July. But the national average hides sharp state differences, meaning two investors can earn the same 18% return and still record very different real outcomes.

An 18% annual return appears to beat Nigeria’s 15.39% headline inflation by about 2.61 percentage points. Yet that same return would beat Abia’s 14.3% inflation rate and fall short of Lagos’ 23.7% inflation rate. Beating national headline inflation does not always mean beating the inflation you face.

What the August Numbers Show

The August figure was 0.04 percentage points lower than July and 7.75 percentage points below the 23.14% recorded in August 2025. Month-on-month headline inflation slowed to 0.71% in August from 1.57% in July. Prices were still rising, just more slowly.

Food inflation eased to 19.57% year-on-year from 20.31% in July. Month-on-month food inflation dropped to 1.02% from 5.56%. Core inflation, which excludes volatile food and energy items, fell to 13.29% from 14.97%, with the month-on-month rate slipping to -0.06%. Energy inflation moved the other way, rising to 4.69% from 4.40% in July.

The August numbers do not capture the recent surge in petrol prices in September. The full impact of higher fuel costs on transport, logistics, food distribution and household expenses is yet to appear in the inflation data.

Many Nigerians still ask why inflation is falling when food, transport, rent and other everyday expenses remain high. The simple answer is that lower inflation does not mean lower prices. The Consumer Price Index rose to 146.3 in August from 145.3 in July. Prices still went up. What changed was the speed of the increase. So when headline inflation fell to 15.39%, it did not mean the cost of living became cheaper.

State Inflation Changes the Maths

State inflation varied widely in August. Lagos recorded the highest headline inflation at 23.7%, followed by Zamfara at 22.6% and Enugu at 22.1%. Imo recorded 20.5%, Delta 19.6%, Adamawa 19.4%, Rivers 19.1%, and Akwa Ibom 18.6%. Abia recorded 14.3%, below the national figure. Overall, 26 states and the FCT recorded headline inflation below 15.39%, while 10 states recorded rates above it. The figures ranged from 23.7% in Lagos to 2.1% in Sokoto.

Consider two investors. One lives in Lagos, the other in Abia. Each invests ₦1 million in an investment that delivers an annual return of 18%. After one year, both would have ₦1.18 million before taxes, fees and transaction costs. On paper, both made the same return. But the Abia investor is earning 18% against 14.3% inflation. The investment is growing faster than the reported rate at which prices are rising in the state. In Lagos, the same 18% return is below the state’s 23.7% inflation. The Lagos investor still has more naira, but the return has not kept pace with reported price increases.

What This Means for Investors

National headline inflation remains a key benchmark for Treasury bills, bonds and other fixed-income investments. For an individual, the national average may not reflect the prices they personally face. An investor earning 18% can beat Nigeria’s 15.39% headline inflation while falling behind a higher state inflation rate. The same security generally offers the same return to both investors. The purchasing-power effect can differ.

For retail investors, the question should go beyond whether an investment beats national inflation. It should also ask whether the return is comfortably ahead of the rate at which their own major expenses are rising. That may mean setting return targets with a reasonable margin above inflation rather than simply aiming to match the headline number.