The deputy governor of the Economic Policy Directorate of the Central Bank of Nigeria (CBN) Muhammad Sani Abdullahi has predicted that Nigeria’s inflation will increase by 32.6% in March, due to high energy costs, fluctuation in the exchange rate, and insecurity.
Mr. Abdullahi while analyzing a document at the CITI-CEEMA Macro Conference held on March 20, 2024, in London, offered insights into Nigeria’s economic projections, highlighting an anticipated rise in the country’s inflation rate.
Part of the document reads,
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“Headline inflation is expected to rise to 32.63% in March 2024, due to: High Energy Prices: Lingering impact of fuel subsidy removal, increasing the cost of household utilities, transportation, and production costs.
“Exchange Rate Passthrough: Depreciation of the naira resulting from the market-determined exchange rate policy, is likely to have a passthrough effect on domestic prices.
“Others are Insecurity: Impact of insecurity on food production, the winding down of the harvest season, and high cost of farm input could negatively impact food prices.”
Inflation in Nigeria is still climbing while it has slowed globally. Recall that in February 2024, Nigeria’s inflation rate rose to 31.70% up from 29.90% in January 2024, marking an increase of 1.80%
A report by Reuters disclosed that Nigeria’s inflation approaches 30%, the highest it had ever climbed since mid-1996, eroding incomes and savings and worsening the cost of living for citizens.
The weaker naira, which has continued to suffer constant devaluation, is reported to be a key factor behind price pressure alongside energy and logistics costs associated with infrastructure problems.
In a post on X by Steve Hanke, on Inflation’s Dashboard for March 2024, Nigeria ranks amongst the top five (5) countries in the world with the highest inflation rate.
The post reads,
“This week’s top 5 inflaters:
1. Zimbabwe(1521%/yr)
2. Argentina (180%/ yr)
3. Sudan (139%/yr)
4. South Sudan (115%/yr)
5. Nigeria (113%/yr)
The int’l press repeatedly reports that ARG has the highest inflation rate in the world = NOT TRUE.”
Analysts predict that Nigeria’s rising inflation could result in stagflation if not addressed urgently.
A member of Nigeria’s Monetary Policy Committee (MPC), Murtala Sabo Sagagi, recently said that the underlying structural issues within the Nigerian economy significantly hinder the traditional monetary policy tools from achieving desired outcomes on inflation control.
Sagagi emphasized that without addressing key issues such as insecurity, food shortages, and a comprehensive roadmap for economic and social rejuvenation, any monetary policy adjustments would have a minimal impact on inflation rates.
In a bid to mitigate the rising inflation with a focus on food inflation, Nigeria’s Vice President Kashim Shettima last month disclosed that the government planned to set up a commodity board to regulate the price of grains and other items to curb food costs and support smallholder farmers who dominate production.
The Central Bank of Nigeria (CBN) however anticipates a turnaround, with inflation expected to start its downward trajectory beginning in May 2024. The Bank’s governor Olayemi Cardoso has hinted that the CBN aims for inflation to fall to about 21%.