Nigeria’s inflation rate reached 34.80% at the close of 2024, significantly surpassing the Central Bank of Nigeria’s (CBN) target of 21.40%. This figure, released by the National Bureau of Statistics (NBS), represented a 2.44% month-on-month increase from November 2024’s 34.60% and a substantial 5.87% year-on-year increase from December 2023’s 28.92%. The NBS attributed the December rise to increased consumer demand during the festive season. While the month-on-month increase was marginally lower than November’s, the overall trend remained concerning, with the average CPI for the year landing at 33.24%, well above the CBN’s target. This outcome underscored the persistent challenges in controlling inflation despite the CBN’s efforts.
Earlier in 2024, CBN Governor Olayemi Cardoso had outlined the 21.40% inflation target to a joint Senate Committee, highlighting excessive money supply as a primary driver of inflationary pressures. He pointed to a 31.22% increase in M3, a broad measure of money supply, between January and November 2023, fueled by increased net foreign assets and substantial ways and means advances. Cardoso emphasized the cessation of over N10 trillion in quasi-fiscal measures, disguised as development finance interventions, which further exacerbated the money supply and consequently, inflation. The CBN’s strategy centered on an inflation-targeting framework, involving transparent communication with fiscal authorities and anticipated improvements in agricultural productivity and global supply chains.
The CBN reiterated its 21.40% inflation target in its March 2024 Macroeconomic Outlook, projecting an overall resilient economy with continued growth and greater exchange rate stability. The report attributed the expected moderation in inflation to the transition to an inflation-targeting framework and a tighter monetary policy. This tighter stance translated into an over 800 basis point increase in the benchmark interest rate throughout 2024, a significant move aimed at curbing inflation. Despite these measures, the year-end figures painted a different picture, with inflation remaining stubbornly high.
Preceding the December 2024 data release, several analysts and institutions had expressed skepticism about the CBN’s ability to achieve its inflation target. Proshare analysts predicted an average inflation rate of 32.57% for 2024, diverging significantly from the CBN’s projection. The World Bank, in its June 2024 Global Economic Prospects report, cautioned that the CBN’s monetary policy tightening might not be sufficient to control inflation, posing a risk to Nigeria’s growth outlook. United Capital Plc, in its mid-year review and outlook, projected a year-end inflation rate of around 27.1%, acknowledging a disinflationary trend but still far from the CBN’s target.
The Nigerian Economic Summit Group (NESG), in its report on inflationary pressures, identified key challenges hindering the CBN’s effectiveness in managing inflation: fiscal dominance, institutional weakness, and information deficiency. The NESG advocated for reforms to address these weaknesses, emphasizing the importance of improved productivity in curbing inflation. While commending the CBN’s return to orthodox monetary policy and its adoption of an inflation-targeting strategy, the NESG stressed the crucial role of policy coordination between fiscal and monetary authorities to achieve price stability. This coordinated approach, coupled with structural reforms and productivity enhancements, was deemed essential to effectively manage Nigeria’s persistent inflationary pressures.
The failure to achieve the 21.40% inflation target highlighted the complexities of managing inflation in the Nigerian economy. While the CBN implemented aggressive monetary policy tightening and emphasized its commitment to an inflation-targeting framework, the impact was insufficient to counteract the underlying drivers of price increases. The analysis from various sources pointed towards the need for a more comprehensive approach, addressing structural issues, strengthening institutional capacity, and improving policy coordination between fiscal and monetary authorities. The persistent inflationary pressures underscored the need for a multifaceted strategy that goes beyond monetary policy adjustments to address the root causes of price instability and foster sustainable economic growth.
