Nigeria’s inflation seen declining to 34.5% in December

Nigeria’s annual inflation is projected to drop, albeit marginally in December by 25 basis points to 34.5 percent, according to a new report by Lagos-based investment and research firm Afrinvest Research.

The mild moderation, according to the report, is attributed to the “high base year impact on the food inflation sub-basket and a further recovery in the exchange rate, with the naira expected to strengthen to below N1,600/$ levels.”

This comes against the backdrop of some analysts predicting that consumer prices will rise further in December due to the festive and seasonal demands and an unrelenting cost of transportation.

Read also: High food prices push inflation to 34.6%, 28th year high

“Imported food inflation, which has shown an upward trend since Sep 2019, accelerated by 133 basis points to 42.29 percent in November, up from 40.96 percent year/year in October,” analysts at Lagos-based FBNQuest Capital Research said.

“Looking ahead, we see the headline inflation rate increasing to 35.2 percent in December 2024,” they said.

This projection is similar to that of the Economist Intelligence Unit (EIU) which sees inflation rising to 35.2 percent in December 2024 and average 27.7 percent in 2025.

The headline inflation quickened to 34.6 percent in November with many analysts forecasting prices to climb higher to over 35 percent in December as cost of food increases.

This increase marks the third straight rise since prices cooled in July and August this year.

According to the National Bureau of Statistics (NBS), the inflation rate was 6.40 percentage points higher than the rate recorded in November 2023 at 28.20 percent.

Headline inflation has remained stubbornly high, despite the CBN’s contractionary monetary policy stance. The persistent rise in consumer prices is primarily driven by rising food prices and elevated energy costs.

Food prices, the largest contributor to Nigeria’s inflation basket, climbed further to 39.93 percent, compared with 39.16 percent recorded in October. And with the festive season nears, prices are expected to more than triple.

Read also: Weak naira, low food production drivers of Nigeria’s food crisis

Nigeria’s food harvest has been severely impacted by insecurity and flooding in food-growing regions of the country which has continued to stoke prices.

But prices are expected to cool in 2025 on high base effect – a situation where the current inflation rate appears lower due to a higher inflation rate in the corresponding period of the previous year.

“Generally, inflation is supposed to begin to moderate in the first half of next year due to high base effect,” Ibrahim Bakre, a professor of Economics said. “The fiscal authorities must tackle food inflation head on for a quicker reduction”.