…Economists see rate peaking at 35% in months
High food prices continued to exert pressure on the wallets of Nigerians in May, with food inflation surging to 40.66 percent.
Rising costs of garri, potatoes, fish, and meat drove higher food prices in the month, according to the National Bureau of Statistics (NBS) which reported that headline inflation climbed to an over 28-year high of 33.95 percent.
Core price growth, excluding agricultural produce and energy, also accelerated to 27% from 26.8%.
The unrelenting surge in costs is straining household budgets, affecting market stability, and altering investment landscapes across Nigeria.
Economists see annual inflation peaking at 35 percent in the next couple of months, before gradually slowing to around 32 percent at year-end.
Read also: Nigeria inflation remains high at 33.95% despite month-on-month slowdown
They also expect the rate-hiking cycle of the Central Bank of Nigeria (CBN) to end in July. The apex bank has hiked interest rates by 14.75 percentage points since May 2022 to 26.25 percent to rein in inflation and defend the currency.
The inflation rate accelerated for the seventeenth consecutive month in May.
However, month-on-month (m-o-m) headline inflation slowed to 2.14 percent in May 2024 from 2.29 percent in April 2024, marking a second broad-based decline since October 2023.
According to the NBS, the primary drivers of inflation included food and non-alcoholic beverages (17.59 percent), housing, water, electricity, gas, and other fuel (5.68 percent), clothing and footwear (2.60 percent), transport (2.21 percent), and furnishings and household equipment and maintenance (1.71 percent).
The Consumer Price Index (CPI), which measures changes in prices of goods and services, also showed that May’s food inflation rate was 15.56 percent points higher compared to the rate of 24.82 percent in May 2023.
Read also; The anatomy of inflation: A letter to Mr President
This increase was driven by a surge in the price of Semovita, oat flake, prepackaged yam flour, garri, beans, Irish Potatoes, yam, water yam, palm oil, vegetable oil, stockfish, mudfish, crayfish, beef head, live chicken, pork head, and bush meat.
A 2024 World Food Programme report attributed the surging food prices to ongoing conflict in key growing states, high cost of inputs and transportation, and a heavy reliance on market purchases.
“High inflation, particularly in food prices, has eroded purchasing power, negatively impacting consumer spending – a critical driver of economic growth,” analysts at Comercio Partners Research noted. This has led households to prioritise spending and skip meals amid shrinking income.
In 2023, Picodi, an international e-commerce organisation, revealed that Nigerian households spend 59 percent of their income on food, the highest globally. Organised labour is currently negotiating higher wages for workers to counteract the impact of inflation.
According to a ‘Cost of Healthy Diet’ report by the NBS and the Global Alliance for Improved Nutrition, the cost of a healthy diet rose by 110.7 percent to N1,035 per day in April 2024 from N491 per day in the same period last year.
Nigerians are expressing their concerns over these high prices. On social media platform X, SisiYemmie tweeted, “I don’t know how people are not panicking because of this food inflation because I’m low-key panicking.”
Another user, Ayin Ibibio, added, “I’m panicking. I’ve been panicking. But what can I do? I cannot generate health problems from panicking because of inflation.”
The World Bank’s latest Nigeria Development Update report revealed that rising inflation and sluggish growth increased the number of poor Nigerians to 104 million in 2023 from 89.8 million at the start of the year.
The recent surge in inflation over the last year has been attributed to Nigeria’s recent reforms from the liberalisation of the foreign exchange market to the removal of fuel and electricity subsidies. These reforms have led to a steep devaluation of the naira and increased input and transportation costs.
“Implementing reforms often comes with a high cost, especially the short- to medium-term effect on citizens,” said the World Bank in a report titled ‘Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms.’
The Bretton Woods Institution highlighted that these reforms have added to the already high cost-of-living pressures on households, impeding purchasing power. To cushion the effect on citizens, especially the poor and vulnerable, the government has announced a three-month cash transfer program to provide 15 million households with 75,000 naira each.
Experts predict that food inflation will remain high until the insecurity crisis deterring farmers from working is resolved. President Tinubu’s administration has emphasised that tackling the country’s food insecurity is a key focus of its economic reform.
Last year, Tinubu declared a state of emergency regarding food insecurity and unveiled an intervention plan for food security, affordability, and sustainability. This plan included immediately releasing fertilisers and grains to farmers and households to mitigate the effects of the subsidy removal.
In February, Abubakar Kyari, minister of agriculture and food security, expressed the Federal Government’s readiness to freely distribute 42,000 metric tons of assorted grains to Nigerians in response to the country’s rising food crisis. He added that efforts were ongoing to ramp up food production and that plans were in place to incentivise farming.
Wale Edun, the minister of finance and coordinating minister of the economy, stated in June that food prices will begin to decline, and food availability will increase as inflation slows. He emphasised that the government was doubling efforts to increase agricultural production to ease stubbornly high inflation.
“Agricultural output is up to bring down inflation. Inflation is slowing month on month. Food prices will come down; food availability will increase,” said the finance minister.
However, the recent scarcity of essentials such as tomatoes is expected to exacerbate food prices further, likely contributing to a surge in food inflation in July.
To combat surging headline inflation, the Central Bank of Nigeria has been hiking its monetary policy rate, which now stands at 26.25 percent. The World Bank, in its ‘Global Economic Prospects’ report, noted that there is a “possibility that the tightening of monetary policy stops short of reining in inflation.”
