TUE DEC 17 2024-theGBJournal| Nigeria’s inflation is fuelled by long-standing structural vulnerabilities that have entrenched price pressures across key sectors.
Headline inflation rose to 34.60% in November 2024, driven by chronic supply-side bottlenecks, exchange rate instability, high production costs, and policy inefficiencies.
Food inflation, at 39.93%, continues to be the main driver, reflecting the impact of poor agricultural productivity, insecurity in farming regions, and high logistics costs. Core inflation, at 28.75%, highlights broader systemic issues affecting essential goods and services beyond food and energy.
Structural inefficiencies in the economy—such as reliance on imports for basic goods, insufficient local manufacturing capacity, and underdeveloped infrastructure—create persistent inflationary pressures.
Currency depreciation further exacerbates these problems, increasing the cost of imported goods and services and continuous decline of purchasing power of individuals and less productivity for firms.
The Central Bank of Nigeria’s (CBN) monetary policy stance has been tightened to curb inflation. However, the effectiveness of these measures has been limited due to structural issues in the economy.
The depreciation of the naira has contributed to inflationary pressures, security
challenges in certain regions of the country have hindered agricultural production and disrupted transportation, leading to higher food prices.
Increases in energy prices, including fuel and electricity, have added to inflationary pressures.
Addressing this inflation requires long-term structural reforms.
Bottom Line
Nigeria’s inflation is expected to remain stubborn through the first quarter of 2025, although the base effect will begin to take hold.
Currency depreciation, lingering impact of subsidy removal and rising import costs may sustain upward pressure. Food prices, a key driver, are unlikely to stabilize in the near term due to agricultural constraints.
On the other hand, tighter monetary policies and potential fiscal reforms could help slow inflationary momentum by mid-2025. We project headline inflation to close at around 35.2% by the end of 2024.
Persistent inflation challenges will weigh on consumer spending, erode real incomes, and hinder growth recovery, creating a challenging operating environment for businesses and investors.
However, without significant reforms to address supply-side bottlenecks and improve
domestic production capacity, core inflation will continue to erode purchasing power and investor confidence.
Highlights
Headline CPI (YoY): In November, the Headline CPI (Year-over-Year) recorded 34.60% from 33.88% in October, reflecting an increase of 0.72%. On an annual basis, it increased by 6.4% from 28.20% in November 2023.
Headline CPI (MoM): On a month-to-month basis, the inflation rate in November 2024
remained at 2.64%, which was the same figure recorded in October 2024
Food Inflation (YoY): Food inflation, a significant driver of overall inflation increased to 39.93% in November, up from 39.16% in October.
Core CPI (YoY): Core inflation, which excludes volatile agricultural produce and energy prices, stood at 28.75% in November, up from 28.37% in October 2024.
Core CPI (MoM): Month-on-month, the Core Inflation rate decreased to 1.83% in November 2024 from 2.14% in October 2024, marking a 0.31% decrease.
By Comercio Partners Research
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