John, a 42-year-old mechanic in Lagos, has seen better days. He has always prided himself on being able to provide for his family, but in recent years, his earnings have been stretched thin.
The cost of everything from food to transportation has skyrocketed, leaving him with tough choices. When the news broke that Nigeria’s inflation rate had dropped from 34.19 percent to 33.40 percent, John was hopeful.
At the local market, John observed a mixed picture. Prices for some items, like tomatoes, peppers, and grains, had dropped, reflecting seasonal changes in agricultural production. Yet staples such as rice, beans, and bread remained alarmingly high.
“What good is a lower inflation rate if my money still can’t cover my needs?” he questioned, reflecting the frustration of many Nigerians facing similar economic hardships.
“Despite the official inflation rate’s decrease, many Nigerians continue to struggle with high prices.”
Despite the official inflation rate’s decrease, many Nigerians continue to struggle with high prices. The Central Bank of Nigeria (CBN) has taken significant steps to address inflation. In 2024 alone, the CBN raised the Monetary Policy Rate (MPR) by a total of 800 basis points, from 18.75 percent to 26.75 percent.
This move was intended to temper consumer spending by making borrowing more expensive. However, the effectiveness of this approach has been mixed, as the broader economic impact remains uncertain.
Nigeria’s inflationary troubles are deeply rooted in its economic structure. The country’s heavy reliance on oil exports renders it vulnerable to global oil price fluctuations. Recent issues, including the devaluation of the naira, supply chain disruptions, and the removal of fuel subsidies, have compounded the inflation problem.
The oil sector’s volatility affects government revenue and overall economic stability, contributing to the persistent inflationary pressures.
Adebayo Oluifa, an economist at an Economic Research Consortium, provides insight into the current situation. “The recent dip in inflation can be partially attributed to seasonal changes in agricultural production. However, these reductions in food prices are often temporary and do not address the underlying structural issues affecting the economy.” Oluifa’s comment highlights the complexity of the inflation issue, where short-term relief does not necessarily equate to long-term stability.
The pressing question now is whether this dip marks the beginning of a more sustained trend or if it is merely a temporary reprieve from more severe economic conditions. For many Nigerians, the high costs of essential goods persist despite the recent inflation decrease.
This discrepancy between statistical improvements and everyday experiences suggests that while the CBN’s measures might appear effective on paper, they have yet to deliver substantial relief to the average citizen.
Read also: Nigeria’s ₦70,000 minimum wage eroded by inflation, real value plummets to ₦52,473.76
Sarah Ojo, a 35-year-old schoolteacher and single mother of two from Ogun State, exemplifies this ongoing struggle. Despite the latest inflation data, Sarah finds herself spending more on essentials like food, school supplies, and transportation.
“I heard the news about inflation dropping, but honestly, it doesn’t feel like it,” she says as she meticulously counts out naira notes to pay for groceries. “Everything is still so expensive. I’m constantly choosing between what we need and what we can afford.”
This sense of disconnect between official inflation statistics and real-life experiences is echoed by an anonymous user on X. The user notes that the recent dip in inflation can be partially attributed to seasonal changes in agricultural production.
In Nigeria, the harvest season for key crops such as tomatoes, peppers, garri, and yam often leads to temporary reductions in food prices. However, these seasonal declines are typically short-lived. Once the harvest season ends, prices often rise again, negating the temporary relief experienced during peak production periods.
The structural challenges within Nigeria’s economy continue to pose significant barriers to achieving long-term price stability. The country’s dependence on oil exports exposes it to global oil price fluctuations. When oil prices decline, the government’s ability to finance its budget is compromised, leading to inflationary pressures.
Additionally, ongoing issues such as infrastructure deficits, security concerns, and policy inconsistencies further complicate the economic landscape.
Read also: Why food prices remain high despite fall in inflation
Oyekan Idris, a capital market analyst, highlights another critical aspect of the inflation problem. “While the CBN’s efforts to manage demand-pull inflation through monetary policy have shown some success, cost-push inflation remains a persistent issue. Variability in fuel prices, for example, has a ripple effect throughout the economy, increasing transportation and production costs.”
The impact of fluctuating fuel prices is evident at petrol stations, where the Nigerian National Petroleum Corporation Limited (NNPCL) sells fuel at N568 per litre, while other stations charge between N600 and N850. These higher fuel costs contribute to increased transportation and production expenses, keeping consumer prices elevated despite the official inflation decrease.
The ripple effects of rising fuel prices are felt across various sectors of the economy. Higher transportation costs lead to increased prices for goods and services, exacerbating the financial burden on consumers.
For many Nigerians, the ongoing rise in transportation and food costs is one of the most tangible and painful aspects of the current economic situation. Despite the slight decline in the official inflation rate, prices for essential items like rice, beans, and bread continue to climb.
This persistent increase in the cost of basic goods disproportionately affects low- and middle-income households, who allocate a substantial portion of their budgets to food and other necessities.
Oluwatobi Abisoye, a financial analyst, underscores the need for structural reforms in addition to monetary policy measures. “While the CBN’s efforts to control inflation through monetary policy are crucial, they must be complemented by structural reforms that address the root causes of economic instability.”
Key reform areas include enhancing Nigeria’s production capacity, particularly in agriculture and manufacturing, and improving security. By boosting domestic production and addressing security concerns, Nigeria can reduce its reliance on imports and better withstand global economic fluctuations.
Similarly, Basit Shuaib, an economist, emphasises the importance of improving the business environment for long-term price stability. “Nigeria faces significant challenges such as insecurity, inadequate infrastructure, regulatory hurdles, and unreliable population data,” Shuaib notes.
Addressing these issues will require coordinated efforts from both the government and the private sector to create a more favourable environment for business and economic growth.
While the recent decline in Nigeria’s inflation rate is a positive development, it should be approached with cautious optimism. The structural challenges that have long plagued the Nigerian economy remain largely unresolved.
Without substantial reforms and a comprehensive strategy to address both short-term and long-term economic issues, the current reduction in inflation may prove to be a temporary reprieve rather than a lasting improvement.
The path to sustained economic stability will require a multifaceted approach that includes effective monetary policy, structural reforms, and targeted measures to support the most vulnerable segments of the population.
In the meantime, individuals like John and Sarah will continue to navigate an economic landscape where inflation, despite its recent dip, still impacts their daily lives in significant ways.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
