Nigerian inflation has soared to 27.3%, a situation that is also worsened by currency depreciation and high-cost energy. Food inflation has risen to 31.5 per cent and this could push more individuals below the poverty line.
According to Our World in Data, Nigeria is among top countries with the highest food expenses, the percentage of total total personal income that goes into food estimated to be 60 percent. The situation would worsen if food inflation continues to rise, this projection implies more misery for those at the bottom of the economic ladder.
The National Bureau of Statistics (NBS) has projected the country’s inflation to hit 30 per cent. This came shortly after the Economist Intelligence Unit’s (EIU) report saying the poor performance of naira and rise of black-market push factors signal a cloudy outlook for inflation.
The report said currency losses on the parallel market, where a sizable share of foreign exchange is transacted, would be a major driver of imported inflation in 2024. From an estimated rate of 30.5 per cent at the end of the year, inflation would stay high at 23.6 per cent in 2024 on average. Added to the exchange rate pass-through effect, EIU pointed at what it called the delayed and insufficient monetary response and fiscal expansionism as key drivers of inflation going forward.
It is important to note that, the Naira has lost about 40 per cent of its value since June when the CBN pulled the plug on the market. It currently trades around N1130/$ at the parallel, which the apex bank often dismissed as non-existent. Prices of imported commodities are set on the black market rate, a reason many economists said the market would continue to determine inflation trends.
The Over 27 per cent inflation suggests that prices are increasing over five per cent faster than they were in October last year when the inflation was 21.9 per cent and that average prices of goods are over 27 per cent higher than they were a year ago.
However, experts have called for the strengthening of exchange rate management. They argued that implementing policies to stabilise and strengthen the local currency could help mitigate the impact of exchange rate fluctuations on imported goods’ prices. They affirmed that call for the diversification of the economy may sound like a broken record, but therein lies the essence of unlocking the latent potential of the Nigerian economy.
Some view that reducing dependency on imports by diversifying the economy could make the country less vulnerable to external shocks and price fluctuations in specific commodities. But with the rising cost of energy, the odds against local manufacturing have continued to defy solutions.
According to the Chief Executive Officer of the Centre for the Promotion of Private Enterprises (CPPE), Dr Muda Yusuf, there is need to implement effective trade policies such as tariff adjustments, import quotas or strategic trade agreements. These, he said, would help to regulate the flow of imports and manage their impacts on inflation. Also, the Nigerian Employers Consultative Association (NECA) has continually stressed the need to promote domestic production. It says that encouraging local industries could reduce reliance on imports and enhance domestic production capabilities.
In its recent forecast for the year, KPMG predicted that Nigeria’s headline inflation may rise to 30 per cent by December 2023 because of fuel subsidy removal and the unification of the foreign exchange market. Following the sharp rise in the cost of living after the removal of fuel subsidy, the federal government came up with some palliative measures to cushion the effect of the removal, part of which includes the release of N5 billion to each of the 36 states and the FCT to purchase foodstuff for distribution to the citizens.
However, six months down the line, the effect of the palliatives has yet to be felt by the citizens. Airing his view on the subject, an economist, Eze Onyekpere, said the money that was disbursed to the states was not tied to any productive engagement or guided by an empirical framework.
On his part, Prof. Godwin Oyedokun of Lead City University said the inflation would not ease if the government continues with its inefficient strategies. He said: “We are not producing, and as long as we depend on importation with the high exchange rate, there’s no way inflation will not continue to rise, I think we are just not ready to control inflation.”
Also, the National President of All Farmers Association of Nigeria (AFAN), Kabir Ibrahim, said at a time like this when harvesting is going on, food prices usually decline, but the trend changed in the last six years due to many factors, including CBN’s Anchor Borrower Programme (ABP).
