Nigeria has faced a difficult year with inflation rates reaching unprecedented heights in the last 12 months. The annual inflation rate reached a near 17-1/2-year high of 21.91% in February 2023, up from 21.82% in the previous month and surpassing market expectations of 21.85%. Food prices, which are the most relevant in the CPI basket, rose even further to 24.35% in February, driven by the scarcity of the redesigned Naira notes and persistent food shortages.
The country’s inflation crisis can be traced back to the naira redesign policy of the Central Bank of Nigeria, which has caused a cash crunch in recent months. The annual core inflation rate, which excludes farm produce, eased slightly to 18.84% in February from a 16-year high of 19.16% in the prior month. The monthly increase in consumer prices slowed to 1.71% from 1.86%, which was the strongest in almost 16 years.
In January 2023, the annual inflation rate reached 21.82%, the highest since September 2005, up from 21.34% in the prior month and against market expectations of a further slowdown to 21.3%. The primary factors behind the increase in food prices were the soaring costs and the depreciation of the Naira currency. Food prices recorded an upturn to 24.32% in January from 23.75% in the previous month. The annual core inflation rate accelerated for the tenth straight month to a 16-year high of 19.2% in January, up from 18.5% in the prior month. On a monthly basis, consumer prices surged by 1.87%, the most in almost 16 years, after a 1.71% increase in the previous month.
Despite these alarming figures, there was some respite in December 2022 when the annual inflation rate eased to 21.34% from 21.91% in the previous month. However, this was still a significant increase compared to previous years.
In Nigeria, the Consumer Price Index (CPI) measures the change over time in prices of 740 goods and services consumed by people for day-to-day living. The index weights are based on expenditures of both urban and rural households in the 36 states.
The most important categories in the CPI are food and non-alcoholic beverages (52% of the total weight), housing, water, electricity, gas, and other fuels (17%), clothing and footwear (8%). Transports account for 7%, and furnishings and household equipment maintenance for 5%. Others include education (4%); health (3%); miscellaneous goods and services (2%); restaurants and hotels (1%); alcoholic beverages, tobacco, and kola (1%); recreation and culture (1%); and communications (1%).
The inflation crisis has caused significant hardship for many Nigerians, particularly those on low incomes. High food prices have hit the poorest households the hardest, leading to increased poverty levels and malnutrition. The Nigerian government and the Central Bank of Nigeria have implemented various measures to try to tackle inflation, such as increasing interest rates and restricting the money supply. Despite implementing these policies, there has been no significant outcome so far.
In conclusion, Nigeria has experienced unprecedented levels of inflation in the past year, resulting in significant challenges for numerous households. To alleviate the suffering of the nation’s most vulnerable citizens, it is imperative that the government and the Central Bank of Nigeria maintain their efforts to address inflation through appropriate measures.
