Food prices spiked in December, making inflation in Nigeria the worst it has been in over 27 years. This exacerbated the country’s cost-of-living crisis and increased pressure on the central bank to hike interest rates.
The National Bureau of Statistics reported on Monday that consumer inflation increased in December for the 12th consecutive month, from 28.20% year over year in November to 28.92% year over year.
The largest economy and most populous country in Africa has not seen inflation this high since mid-1996.
The majority of Nigeria’s inflation is attributed to the food inflation rate, which increased to 33.93% in December from 32.84% in the previous month.
Prices for a wide variety of goods, including bread and cereals, oil, fish, meat, fruit, and eggs, increased, according to the statistics office.
According to analysts, pricing pressure has also been exacerbated by falling naira values and rising fuel costs.
According to Capital Economics’ Africa economist David Omojomolo, “inflationary pressures are only likely to build from here,” citing the weakening naira and ripple effects from last year’s elimination of a fuel subsidy.
It seems unlikely that inflation will peak until mid-2024, according to his prediction that it will cross 30% by the end of the first quarter.
In an attempt to spur economic growth, President Bola Tinubu of Nigeria launched the country’s most radical reforms in decades last May when he devalued the currency and eliminated an expensive but well-liked fuel subsidy. But inflation has gotten worse, and growth hasn’t started to recover yet.
Since taking office in September, Governor Olayemi Cardoso of the Central Bank of Nigeria (CBN) has not convened a rate-setting meeting.
Capital Economics’ Omojomolo stated in a research note that “we think the CBN will need to raise rates by 400 basis points, to 22.75%, at the next meeting, to show that it is taking the inflation fight more seriously.”
“There’s a real chance, though, that the CBN will disappoint once more. By doing this, a large portion of the enthusiasm and hope surrounding the policy change that President Tinubu initiated last year would be undermined.”
