Nigeria’s inflation rate reached its highest level in over 27 years in December 2023, driven by surging food prices, intensifying a cost-of-living crisis and placing increased pressure on the central bank to consider interest rate adjustments.
The National Bureau of Statistics reported that consumer inflation rose for the 12th consecutive month to 28.92% year on year, up from November’s 28.20%. This marks the highest inflation level since mid-1996 in Africa’s largest economy and most populous nation.
Food inflation, a significant component of Nigeria’s inflation basket, increased to 33.93% in December, compared to 32.84% the previous month. The rise in prices affected various food items, including bread, cereals, oil, fish, meat, fruit, and eggs.
Analysts attribute the inflationary pressures to higher fuel prices and a weakened naira currency. David Omojomolo, Africa economist at Capital Economics, emphasized that inflation is likely to surpass 30% by the end of the first quarter, with a peak expected in mid-2024. He highlighted second-round effects from last year’s removal of a fuel subsidy and naira depreciation as contributing factors.
President Bola Tinubu’s economic reforms, initiated in May, which involved scrapping a costly fuel subsidy and devaluing the currency, aimed at stimulating economic growth. However, the anticipated economic recovery has not materialized, exacerbating the inflationary challenges.
Central Bank of Nigeria (CBN) Governor Olayemi Cardoso, who assumed office in September, is yet to convene a rate-setting meeting. Omojomolo suggests a potential 400 basis points rate hike, to 22.75%, at the next meeting to demonstrate a more robust commitment to combating inflation. Failure to do so, he warns, could undermine the positive momentum generated by President Tinubu’s policy shifts last year.
(Reuters)
