Nigeria’s inflationary pressures are projected to persist, with Cowry Research forecasting a year-end inflation rate of 35.20% for December 2024, a slight increase from November’s 34.60%. This persistent rise, despite the Central Bank of Nigeria’s aggressive interest rate hikes totaling over 800 basis points in 2024, culminates in an estimated average annual inflation rate of 33.21% for the year, a significant jump from the 24.52% recorded in 2023. This surge is attributed to a confluence of factors, including seasonal demand pressures during the festive period, coupled with deeper structural and economic challenges that have hampered effective policy implementation.
The festive season, characterized by increased consumer spending on goods, services, travel, and accommodation, traditionally contributes to upward price pressure. This seasonal effect exacerbates the existing inflationary environment, which is driven by more fundamental issues. These include structural bottlenecks such as inadequate infrastructure, high energy costs resulting from fuel subsidy removal, and logistical inefficiencies, all of which erode the impact of monetary policy adjustments and leave businesses and consumers struggling with escalating costs. The weakened Naira continues to fuel inflation by increasing import costs, particularly for essential commodities and consumer goods, further contributing to the overall price surge.
Food inflation remains a primary driver of the overall inflation rate, reaching a concerning 39.93% year-on-year in November 2024, a sharp increase from 32.84% in November 2023. This upward trend in food prices is expected to continue into December. Imported food inflation also contributes significantly, reflecting rising global prices for commodities like fish, rice, and dairy products, further compounded by the challenges posed by the depreciating Naira. Beyond food, core inflation also reached a record high of 28.75% year-on-year in November, indicating broad-based price increases across the economy. Disruptions to agricultural production and distribution networks, caused by persistent insecurity and flooding in key agricultural regions, have further exacerbated food price increases, putting additional strain on Nigerian households.
While some anticipate a potential moderation of inflationary pressures in 2025 due to base effects, experts caution that the government’s planned financing of its substantial N13.08 trillion budget deficit for 2025 could introduce new inflationary pressures. This concern underscores the complex interplay of fiscal and monetary policy in managing inflation. The existing inflationary pressures, driven by a combination of structural bottlenecks, currency depreciation, rising energy costs, and food price increases, paint a challenging economic landscape for Nigeria.
The National Bureau of Statistics (NBS) plans to release two Consumer Price Index (CPI) reports in January 2025. The first report, scheduled for January 15th, will utilize the old base year for calculations, while the second report, covering January 2025, will be based on a rebased year. The rebasing, with a weight reference period of 2023 and a price reference period (base year) of 2024, aims to provide a more accurate and up-to-date reflection of the country’s current economic conditions. This dual release will allow for a comparison between the old and new methodologies and provide a clearer picture of the inflationary trajectory.
In addition to the standard headline, core, and food inflation figures, the rebased CPI report will introduce three new indices: a services index, an energy index, and a farm produce index. These additions will offer more granular insights into specific sectors of the economy. The services index will track price changes in key service sectors like education and transportation. The energy index will monitor price fluctuations within the energy sector, while the farm produce index will focus on the volatility of agricultural product prices. These new indices will provide valuable data for policymakers and analysts to better understand the dynamics of inflation and formulate targeted interventions. The December inflation figures, expected in mid-January, will underscore the severity of the cost-of-living crisis and highlight the urgent need for effective measures to address these multifaceted challenges.
