Nigeria's Inflation Rate Sees Uptick to 24.08% in July, Reflecting Economic Strain

Nigeria's annual inflation rate experienced a notable uptick, surging to 24.08% in July, marking a distinct rise from the previous month's 22.79%, as reported by the National Bureau of Statistics (NBS) on Tuesday. The data indicated that the inflation rate for July 2023 displayed a notable 1.29% increase compared to the headline inflation rate in June 2023.

Year-On-Year Comparison Highlights Significant Inflation Spike

The NBS emphasized that on a year-on-year basis, the headline inflation rate was 4.44% points higher in comparison to the rate registered in July 2022, which stood at 19.64%. This implies that the year-on-year headline inflation rate for July 2023 showed an evident rise when juxtaposed with the same month of the previous year, namely July 2022.

The inflationary pressures were notably influenced by multiple factors, including the persistent escalation in food prices across Nigeria over recent years. This situation was further exacerbated by government policies, such as the removal of petrol subsidies and the unification of the forex exchange (FX) market segments, both initiatives heralded for their intentions to boost market transparency and investor confidence.

The removal of petrol subsidies, announced by President Tinubu during his inauguration on May 29, caused a ripple effect in the Nigerian economy. This policy change, combined with the Forex Market Unification by the Central Bank of Nigeria (CBN), not only generated positive reception for its transparency goals but also placed additional pressure on local currency and manufacturers, thereby contributing to the overall surge in prices.

Inflation Leads to Monetary Measures

The sustained high inflation rate within Africa's largest economy led the Central Bank of Nigeria (CBN) to resort to significant monetary measures, including an interest rate hike to 18.75% in July. The central bank noted that this interest rate increase has indeed played a role in moderating the inflation rate. Additionally, the bank weighed the option of further moderate hikes, considering anticipated liquidity injections stemming from the unification efforts in the forex exchange markets.

In response to the escalating food prices, President Tinubu declared a State of Emergency on food insecurity, underscoring the urgency to address the issue of food availability and affordability. This move also prompted the inclusion of these matters within the scope of the National Security Council's responsibilities.

Contributing Factors to Inflation

In its comprehensive analysis of inflation, the NBS emphasized the factors that contributed to the acceleration of the headline index, which spanned across different categories such as food, non-alcoholic beverages, housing utilities, clothing, footwear, and transportation. 

The month-on-month data for July 2023 unveiled a headline inflation rate of 2.89%, marking a 0.76% rise compared to the 2.13% rate recorded in June 2023. Notably, the report also indicated that the average Consumer Price Index (CPI) witnessed a significant change of 21.92% over the twelve months leading up to July 2023, surpassing the 16.75% figure registered in July 2022.

Intensified Food Inflation Challenges

The food inflation rate surged to 26.98% on a year-on-year basis in July 2023, marking a substantial 4.97% point increase compared to July 2022's rate of 22.02%. This upward trend was attributed to escalating prices of commodities such as oil and fat, bread and cereals, fish, potatoes, yam and other tubers, fruits, meat, vegetables, milk, cheese, and eggs. The month-on-month analysis revealed a 3.45% food inflation rate for July 2023, an increase of 1.06% from June 2023's rate of 2.40%. The annual rate of food inflation for the twelve-month period ending in July 2023 recorded a significant 24.46% increase, reflecting a notable rise from the 18.75% average rate recorded in July 2022.