Food Shortages and Rising Costs Drive Nigeria’s Inflation Rate to 24%

Nigeria’s inflation rate continued its upward trend, reaching approximately 24 percent in June, according to projections by various analysts. This marks the sixth consecutive month of rising inflation, with economic intelligence reports indicating that Nigerians are grappling with ongoing food shortages, surging energy costs, and a decline in the value of the national currency.

Ahead of the official inflation report by the National Bureau of Statistics (NBS), independent consumer surveys and econometric models highlighted the persistence of high inflation driven by general increases across various living cost categories. The NBS is expected to release the official inflation report for June 2023 today.

The inflation rate had been steadily increasing, rising from 21.9 percent in February 2023 to 22.04 percent, 22.22 percent, and 22.41 percent in March, April, and May 2023, respectively.

Leading economic and finance research firm, Financial Derivatives Company (FDC), projected a lower estimate of 22.8 percent for June, which still falls within the highest point recorded in the past 18 years. FDC attributed the sustained rise in the general price level to factors such as the Eid ul Kabir festival, planting season effects, and increased transport and logistics costs due to the removal of petrol subsidy.

FDC’s econometric model suggests that inflation risks remain high, indicating that an inflection point may not be reached in the near future. Cordros Securities, on the other hand, expects the headline inflation to rise by approximately 217 basis points to 24.58 percent, aligning with the average predictions of several analysts.

Despite the concerning inflation numbers, analysts express optimism about ongoing fiscal and monetary reforms implemented by the government. They believe these measures will eventually moderate living costs and boost the economy in the medium to long term. President Bola Tinubu recently declared a state of emergency on food security and introduced direct policy interventions in food production, processing, storage, transportation, and pricing, including the immediate release of fertilizers and grains to farmers’ households to mitigate the effects of subsidy removal.

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