The relative stability of the naira in December and the introduction of the 150-day window import duty waiver on key staples by the federal government slowed imported food inflation to its lowest since September 2019.
This is as headline inflation continued its upward trajectory in December 2024, rising for the fourth straight time to 34.8 percent but the momentum of increase has now moderated for the second consecutive month, highlighting the impact of CBN’s sustained tight monetary policy.
“Although its impact on the headline reading is less pronounced, imported inflation moderated to 41.29 percent year-on-year, from 42.29 percent in the previous month, marking its first pause since September 2019,” analysts at FBNQuest Capital Research said in a note on Thursday.
“The deceleration in imported food reading can be attributed to a number of factors, including reduced naira volatility in December, less incentive to import food items due to the expensive pricing of FX, and the introduction of the 150-day window import duty waiver on essential food items.”
The naira’s volatility is gradually being subdued by the transparency and efficiency in the market, occasioned by the Electronic Foreign Exchange Matching System (EFEMS) launched in December last year.
Read also: Naira ends week flat as external reserves decline
The local currency appreciated by N125 to a dollar one month after the EFEMS was adopted, according to a BusinessDay’s report with analysts saying the gains might be an indication that the naira’s rebound journey might just have begun.
Almost six months ago Nigeria announced a series of measures to curb food inflation that’s rising at its fastest pace in three decades in a country where almost half of its more than 200 million people live in extreme poverty.
Despite the government’s good intentions, the import duty waiver ultimately proved to be a failed initiative, failing to yield the expected results as the six-month period drew to a close on December 31st, 2024.
But a consignment of 32,000 tons of rice — the first in a decade — arrived in Lagos from Thailand under the tariff moratorium in boost for food supply.
While imported food prices are cooling, food inflation is also declining. Data from the National Bureau of Statistics (NBS) showed that food inflation eased to 39.84 percent compared with the 39.93 percent in November.
According to the Bureau, price decreases recorded in bread and cereals, soft drinks, local beer, potatoes, yams, tobacco, and other tubers were responsible for the reduction in food prices.
Read also: Naira fall takes $310bn toll on economy
The NBS is set to complete the rebasing of Nigeria’s Consumer Price Index (CPI) by the end of January 2025, marking a significant shift in the computation of analysing changes in price trends of goods and services.
The revised inflation methodology proposes a new base year of 2024 compared with the current base price year of 2009.
While price levels remain significantly elevated, the proposed re-weighting of inflationary components of the CPI inflation basket, such as food prices, electricity, gas, and other fuels, is likely to result in lesser impact on Nigeria’s overall headline reading.
Meanwhile, analysts at CardinalStone, a research and investment firm expect inflation to cool in January 2025 on the back of high base effect, naira stability and lower petrol prices.
“In January 2025, we expect inflation to decelerate due to the high base effect from 2024, the lagged impact of lower PMS prices, and relative currency stability,” the analysts explained in a research report on Thursday.
“On FX, the argument for Naira stability is strong, supported by decent FX reserves, greater access to dollar-denominated debt, attractive carry-trade, increasing portfolio inflows, and support from the newly created Electronic FX system. Consequently, we expect inflation to moderate to 34.52%,” they said.
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