The soaring prices of bread, fish, eggs and other essential food items have pushed Nigeria’s headline inflation to a new 18-year high, worsening the cost-of-living crisis facing many households.
Data released by the National Bureau of Statistics (NBS) on Wednesday show that the inflation rate, which was largely driven by food prices, quickened in October for the 10th consecutive month.
It rose to 27.33 percent from 26.72 percent in the previous month, according to the Consumer Price Index (CPI), which measures changes in prices of goods and services.
The CPI report shows that food and non-alcoholic beverages contributed the most (14.16 percent) to the increase in the headline inflation.
Food inflation rose to 31.52 percent in October from 30.64 percent in the previous month.
“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, milk, cheese, and eggs,” the NBS said.
Flour and sugar, which are major components of bread, were among the commodities that recorded the highest price increases, analysts at Financial Derivatives Company Limited (FDC), led by economist Bismarck Rewane, said in their latest economic bulletin.
“The price of flour has spiked by 46.88 percent to N47,000 per 50kg bag from N32,000 a year ago,” they said.
They said the prices of locally produced commodities have remained on an upward trend despite the harvest season (October-December) “largely because of higher logistics costs, poor road infrastructure, and other logistics constraints”.
“Disturbingly, inflation continues to bite, retarding growth and eroding consumer disposable income,” the FDC analysts said.
David Omojomolo, Africa economist at London-based Capital Economics, said the rise in the headline rate was driven largely by higher food prices.
On a month-on-month basis, the food inflation rate in October 2023 was 1.91 percent, down from 2.45 percent in the previous month. This means that food inflation increased in October at a slower pace.
Analysts at Cordros Research attributed the moderation in food inflation to the seasonal increase in food supplies in line with the main harvest season, as the harvested food crops reach both the rural and urban markets.
They added that the decline in global food prices had started to filter into domestic food prices.
They said: “We expect the main harvest season to have a feed-through impact in improving food supplies in November, albeit not large enough to temper food prices relative to the prior year significantly. Notably, we expect a limited and below-average increase in food supplies as we understand that the prolonged dry spells during the planting season in the North, delays in the onset of rainfall and increased levels of banditry and kidnapping to have likely limited the increase in food supplies from the primary harvest season.
“In addition, we anticipate an increase in the demand for food produce ahead of the festive period in December amid still-high transport costs. Consequently, we forecast a 1.87 percent m/m increase in food prices in November, translating to 32.13 percent y/y.”
The core inflation, which excludes the prices of volatile agricultural produce, rose to 22.58 percent in October from 21.84 percent in the previous month.
The rising prices of food and other goods and services are putting a strain on consumers’ budgets and making it increasingly difficult for many to afford basic necessities.
A recent survey by SBM Intelligence found that Nigerians said they were spending 97 percent of their monthly income on food.
Ayo Akeem, the owner of a small chicken poultry farm, lamented that the increase in the price of chicken feeds has forced her to suspend her poultry business.
“I spend a total of N50,000 on chicken food monthly for my small poultry. This, combined with other expenses needed to run the farm, made me stop the business. This is why farmers have increased the prices of eggs and chicken,” she said.
The World Bank said in June that inflation pushed an estimated four million more Nigerians into poverty in the first five months of this year.
Last week, some fish sellers in Ogun State protested the incessant increase in the prices of fish, and a video has gone viral of a fish seller groaning about surging fish prices and low patronage.
“The fish we were buying for N30,000 is now N70,000 per carton; ‘Kote’ we used to buy for N15,000 is now N40,000. Please help us, the economy is really hard,” she said in Yoruba.
Omojomolo said inflationary pressures in Nigeria would continue to build.
“The fuel subsidy’s removal will continue to add to inflation, partly through second-round effects. And the naira’s fall in value against the dollar will continue to push up inflation too. As a result, we expect inflation to rise to more than 30 percent by early 2024,” he said.
Rate hikes, reforms bearing fruit, says CBN
In a bid to fight inflation, the Central Bank of Nigeria (CBN) has raised its key interest rate, also known as the monetary policy rate, by 725 basis points (bps) from 11.5 percent in May 2022 to 18.75 percent currently.
“The CBN will need to act with aggressive hikes to maintain its credibility and bring down inflation. We are reaching almost four months since the CBN’s last policy meeting in July; we think they will raise rates by 300bp to 21.75 percent. Continued inaction, however, remains a key risk to policymaking credibility,” Omojomolo said.
Isa AbdulMumin, spokesman of the CBN, said the slower pace of increase in inflation in October compared to the previous month showed that the apex bank’s tight monetary policy stance and its money market reforms have already started yielding the desired effect.
He said in a briefing with journalists in Abuja on Wednesday.
He said the aggressive monetary tightening using various liquidity mechanisms including removing the cap on the Standing Deposit Facility and Open Market Operations had raised Open Buy Back rates from less than 1 percent in August to their expected levels around the monetary policy rate.
According to him, available statistics showed that the first indication of deceleration in prices was recorded in September, and further reforms in the money market, which commenced in October, has accelerated easing in prices as indicated by the substantial drop in month-on-month changes recorded in October.
“Moderation in month-on-month changes in prices observed in the headline, food and core components of the consumer basket followed reforms in the money market and relative stability in the FX market,” he said.
Analysts at FBNQuest have said to sustain its continued efforts in curbing the persistent rise in inflation, the Monetary Policy Committee is expected to raise the benchmark interest rate by 50bps at its next meeting.
In a recent report, analysts at KPMG projected that inflation would hit 30 percent by December 2023 as a result of the combined influence of fuel subsidy removal and foreign exchange liberalisation.