Nigeria’s inflation rose to a 21-year high of 28.92 per cent in December 2023, new data from the National Bureau of Statistics has shown.
December’s inflation rate is a 0.72 percentage point increase from the 28.20 per cent that was recorded in November 2023. According to inflation data from the Central Bank of Nigeria starting from 2003, December’s 28.92 per cent inflation rate is officially the highest recorded. The previous was 28.2 per cent recorded in August 2005 and November 2023.
The NBS revealed this in its ‘Consumer Price Index (December 2023)’ published on Monday.
Members of the Orgnaised Private Sector on Monday blamed naira depreciation, fuel subsidy removal, insecurity, among others for the persistent rise in inflation.
The NBS report read in part, “On a year-on-year basis, the headline inflation rate was 7.58 per cent points higher compared to the rate recorded in December 2022, which was 21.34 per cent. This shows that the headline inflation rate (year-on-year basis) increased in December 2023 when compared to the same month in the preceding year (i.e., December 2022).
Furthermore, on a month-on-month basis, the headline inflation rate in December 2023 was 2.29 per cent, which was 0.20 per cent higher than the rate recorded in November 2023 (2.09 per cent). This means that in December 2023, the rate of increase in the average price level is more than the rate of increase in the average price level in November 2023.”
Major contributors to inflation were food and non-alcoholic beverages (14.98 per cent), housing, water, electricity, gas and other fuel (4.84 per cent), clothing and footwear (2.21 per cent), transport (1.88 per cent), furnishings and household equipment and maintenance (1.45 per cent), and education (1.14 per cent).
Inflation in cities was 31.00 per cent in the month being reported. It was 27.10 per cent in rural areas. Kogi (35.58 per cent), Lagos (32.33 per cent), and Rivers (32.16 per cent) continue to be the most expensive states to stay in Nigeria with their inflation rate above the national average.
Borno (23.27 per cent), Taraba (24.92 per cent), and Katsina (26.52 per cent) are the least expensive states to stay in the country with inflation rates below the national average.
Food inflation continues to outperform general inflation. In December 2023, the food inflation rate was 33.93 per cent (it was 32.84 per cent in November) due to increases in prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, meat, fruit, milk, cheese, and egg.
Food is most unaffordable in Kogi (44.73 per cent), Kwara (41.33 per cent), and Imo (39.54 per cent) where food inflation is a lot higher than the national average. In Bauchi (27.49 per cent), Jigawa (27.98 per cent), and Sokoto (28.72 per cent), food inflation is quite moderate.
Nigeria is facing its worst cost of living crisis with year-on-year inflation refusing to slow down in 2023. Inflation was 21.82 per cent in January, 21.91 per cent in February, 22.04 per cent in March, 22.22 per cent in April, 22.41 per cent in May, 22.79 per cent in June, 24.08 per cent in July, 25.8 per cent in August, 26.72 per cent in September, 27.33 per cent in October, 28.20 in November, and 28.92 per cent in December.
While inflation didn’t hit 30 per cent as predicted by many experts it has been blamed for rising poverty rates in the county. Between January and May 2023, inflation pushed an estimated four million people into poverty in country, according to the World Bank.
In a November report, the Bretton Woods institution disclosed that the continued spike in inflation would push a further 2.8 million people into poverty by 2023’s end.
In the December update of its Nigeria Development Update report, the bank said, “Sluggish growth and rising inflation have increased poverty from 40 per cent in 2018 to 46 per cent in 2023, pushing an additional 24 million people below the national poverty line.
“The number of poor rose from 79 million in 2018 to 104 million in 2023, with urban poor—more exposed to inflation—increasing from 13 to 20 million, while the number of poor people in rural areas increased from 67 to 84 million.”
The removal of fuel subsidy and a foreign exchange rate unification policy which has led to the steep depreciation in the value of the naira have been blamed for the surge in the country’s inflation.
Nigeria’s economic growth is expected to be impacted by the surge in inflation rate. Recently, the International Monetary Fund disclosed that the country’s inflation will slow economic growth.
It said, “Growth in Nigeria is projected to decline from 3.3 percent in 2022 to 2.9 per cent in 2023 and 3.1 per cent in 2024, with negative effects of high inflation on consumption taking hold.”
In a December update, global rating agency, Moody, disclosed that the continued rise in inflation in the country has the potential to lead to social unrest.
It said, “Increasingly high inflation generates spending pressure on the government and raises social risks, while the extent of fiscal relief from the removal of the oil subsidy remains unclear at this stage.”
To address the surge in inflation, the Central Bank of Nigeria’s Governor, Olayemi Cardoso, recently declared that the apex bank will focus on an inflation targeting framework to enhance the effectiveness of its monetary policy.
He also recently affirmed, “The mandate of the CBN as far as I am concerned is to focus on inflation, stability of pricing and things that don’t concern us, we leave them and get out of them and focus fully on the issue of inflation.”
In its outlook for 2024, Stears predicted that inflation may range between 27.59 per cent to 31.85 per cent in 2024. The firm said, “Stears projects an average annual inflation rate between 27.59 per cent to 31.85 per cent for 2024, considering the current economic climate and the depreciating naira.
“We anticipate the CBN will maintain orthodoxy and continue its tightening policy in the near term to address inflationary pressures. Immediate action on dollar illiquidity is crucial for effective inflation management. In the longer term, enhancing productivity, a task for fiscal authorities, will be key.”
The World Bank expects Nigeria’s inflation to moderate to 21.7 per cent in 2024, however the country outperformed its 24.5 per cent forecast for 2023.
OPS reacts
Reacting to the spike in inflation, the President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said the year-end inflation rate agreed with the chamber’s earlier prediction, particularly considering the economic reviews implemented by the Federal Government.
Idahosa said, “All the figures we are seeing this year are many years high in Nigeria. Any inflation above 9 per cent in Nigeria is not good. We should be targeting inflation of six to nine per cent.”
He stated that businesses have continued to grapple with inflation figures reflective of economic conditions that have not been witnessed in the country in a long time.
On his part, the Chairman of the Nigeria Economic Summit Group, Mr Niyi Yusuf, blamed the current inflation to printing of the currency through Ways and Means.
He said, “Current inflation is an outcome of our prior actions notably printing of money through Ways and Means to fund the budget without corresponding increase in productivity, removal of fuel subsidy, FX rate harmonization and depreciation of the naira, insecurity that impaired farming and production, and poor transportation logistics.
“The high inflation is making the poor poorer leading to a cost-of-living crisis. The palliatives by government while commendable was only targeted at less than 20 per cent of those in poverty and so more needs to be done to ameliorate the situation, especially transport and food prices, and to provide relief before we can begin to feel the impact of the more sustainable and long term solution like infrastructure for compressed natural gas buses, food harvest, and monetary stability actions of the Central Bank of Nigeria.”
A seasoned economist, Dr. Alias Aliyu, said that the figure is bad for foreign direct investments.
“For inflation to have grown to almost 29 per cent, it is not good for our economy. It is a negative figure for Nigeria and the economy, even for foreign direct investment. The more it goes up, the more it becomes a problem for Nigeria.
“In the budget for 2024, the benchmark was 21 per cent inflation, so this cast a negative outlook for the economy. The main issue that has not been addressed is the floating of the naira and the removal of fuel subsidy. If you also look at the production level, it is also a big problem.”
He further stated that it is time for the country to work seriously on its manufacturing sector to ensure that they are much stronger to produce.
He added, “The purchasing power of Nigerians is also low. These are the issues. Inflation will go down; it just depends on the variable we put in place. This is just the gestation period of Tinubu’s plans, so it still requires some time to see if some of the policies are working. Recall that President Tinubu also mentioned that he would declare a state of emergency for security, but it is not reflecting yet.”