After nearly two years of relentless inflationary pressures, Nigeria has witnessed a slight dip in its inflation rate, from 34.19 percent to 33.40 percent. This marginal reduction, coming on the heels of an aggressive 800 basis points (bps) hike in the Monetary Policy Rate (MPR) in 2024, may appear as a positive sign. However, for most Nigerians, the reality remains largely unchanged.
The pressing question now is whether this dip signals the start of a sustained downward trend or merely offers temporary relief.
Nigeria’s inflation problem has long been a persistent challenge, worsened by a complex mix of factors including naira devaluation, supply chain disruptions, subsidy removal, and rising global commodity prices. The Central Bank of Nigeria’s (CBN) decision to hike the MPR—a tool intended to curb inflation by making borrowing more expensive—was a clear indication of its intent to tame inflation. Yet, while this move was necessary, its effects on the real economy have yet to be fully felt by the masses.
“Yet, while this move was necessary, its effects on the real economy have yet to be fully felt by the masses.”
The recent inflation dip can be attributed to several factors. For one, there has been a slight fall in the prices of some staple foods due to seasonal factors, such as the harvest of tomatoes, peppers, garri, and yam. Additionally, the government’s temporary opening of borders for 150 days, allowing the importation of staple foods at zero import duty, has started to bear fruit, albeit slowly. However, these measures alone are insufficient to inspire confidence that the decline in inflation will be sustained.
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Scepticism arises from the underlying structural issues within Nigeria’s economy. The country remains heavily reliant on oil exports for revenue, making it vulnerable to global oil price shocks. Moreover, the naira’s value continues to be under pressure, with the parallel market exchange rate significantly higher than the official rate. This disparity continues to fuel inflation, particularly for imported goods and services, which constitute a large portion of consumer spending.
Furthermore, while the CBN’s tightening of monetary policy has helped curb demand-pull inflation, cost-push inflation—driven by rising production costs—remains a significant challenge. For instance, the varying prices of fuel per litre at different petrol stations, with NNPCL selling at N568 and others ranging between N600 and N850, have led to higher transportation and production costs, which in turn have kept consumer prices elevated.
It is also crucial to recognise that while the official inflation rate has shown a slight decline, its impact on the average Nigerian household is still severe. Food inflation, which directly affects the poor and middle class, remains stubbornly high. The prices of basic food items like rice, beans, and bread continue to rise, eroding the purchasing power of the majority of Nigerians. The recent drop in inflation has yet to translate into lower prices at the market, leaving many to question whether the official statistics reflect their lived experiences.
The CBN’s efforts to control inflation are commendable, but they must be accompanied by structural reform. These reforms should focus on boosting domestic production, particularly in agriculture and manufacturing, to reduce the country’s reliance on imports. Furthermore, improving the business environment by tackling issues such as insecurity, inadequate population data, power supply challenges, infrastructure deficits, and regulatory bottlenecks would help lower production costs and, consequently, consumer prices.
In conclusion, while the recent decline in Nigeria’s inflation rate is a welcome development, it is too early to declare victory. The structural challenges that have plagued the economy for decades remain largely unaddressed, and without significant reforms, the current inflation dip may prove to be only a temporary reprieve. The government and the CBN must collaborate to implement comprehensive policies that ensure long-term price stability, economic growth, and improved living standards for all Nigerians. Until then, the masses may have to wait a little longer to feel the positive effects of this inflation decline.
