Nigeria’s annual inflation rose in September to its highest level in about two decades at 26.72%, amid a worsening cost-of-living crisis. According to the September 2023 CPI data released by the NBS, Nigeria’s headline inflation rate spiked 90bps from the previous month to 26.7% y/y – the highest level in 18 years. The price pressure was driven by both the Food (up 70bps to 30.6%) and Core inflation (up 59bps to 21.8%) sub-components inspired by the lingering food supply shortage and pressured exchange rate. According to the National Bureau of Statistics “in September 2023, the headline inflation rate increased to 26.72 per cent relative to the August 2023 headline inflation rate which was 25.80 per cent. Looking at the movement, the September 2023 headline inflation rate showed an increase of 0.92 per cent points when compared to the August 2023 headline inflation rate. On a year-on-year basis, the headline inflation rate was 5.94 per cent points higher compared to the rate recorded in September 2022, which was 20.77 per cent”.
This shows that the headline inflation rate increased in September 2023 when compared to the same month in the preceding year (i.e., September 2022). Furthermore, on a month-on-month basis, the headline inflation rate in September 2023 was 2.10 per cent, which was 1.08 per cent lower than the rate recorded in August 2023 (3.18%). This means that in September 2023, the rate of increase in the average price level was less than the rate of increase in the average price level in August 2023. The September inflation rate rose for a ninth straight month from August’s 25.8%, the National Bureau of Statistics (NBS) said, with millions of Nigerians impoverished due to the impact of President Bola Tinubu’s reforms.
Food inflation, making up the bulk of Nigeria’s inflation basket, rose to 30.64 per cent in September from 29.34 per cent in August. Tinubu has been under pressure to ease economic hardship after scrapping a decades-old petrol subsidy that tripled prices and allowed the Naira to depreciate more than 50 per cent, sending prices surging in Africa’s top oil producer and most populous nation. The central bank “has an unenviable inflation task and will need to respond with aggressive monetary tightening,” said David Omojomolo, Africa economist at research firm Capital Economics.
“Our expectation is that the inflation picture will continue to worsen. The impact of the removal of fuel subsidies will continue to push up on inflation while the naira’s devaluation will also continue to feed through,” he said. Inflation in Nigeria has risen to double-digits since 2016, eroding incomes and savings, and may prompt the central bank to raise interest rates, which are already at their highest in nearly two decades, at its next meeting. Annual inflation is at its highest now since 2005. “The rise in food inflation on a year-on-year basis was caused by increases in prices of oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruit, meat, vegetables and milk, cheese, and eggs,” the NBS said. Economic analysts said Naira depreciation, higher food and energy prices and logistical costs were some of the key drivers of Nigeria’s inflation.
Last week the central bank, under new Governor Olayemi Cardoso, pledged to intervene in the country’s foreign exchange market occasionally to boost liquidity, after ending an eight-year restriction on 43 items, including rice, poultry and cement, from accessing foreign exchange on the official window. The central bank hiked rates by a smaller than expected margin at its last meeting in July, contrary to analysts’ forecast. Some analysts expect a more hawkish stance under Cardoso at the bank’s next rate-setting meeting. Tinubu has defended his policy reforms and vowed not to go backwards despite strong opposition from labour unions who say they have hurt the poor and should be reversed.
