A pricey problem
Nigeria’s headline inflation rate rose to 32.70% in September 2024, up from 32.15% in August, reflecting a 0.55% month-on-month increase…
Nigeria’s headline inflation rate rose to 32.70% in September 2024, up from 32.15% in August, reflecting a 0.55% month-on-month increase. Year-on-year, this represents a 5.98% rise from 26.72% in September 2023. Monthly inflation was 2.52%, slightly higher than August’s 2.22%. Food inflation surged to 37.77% year-on-year, up 7.13% from 2023, with a monthly rise of 2.64%. Core inflation for September stood at 27.43%. Urban inflation was recorded at 2.67%, while rural inflation reached 2.39%, both on a month-on-month basis.
It is concerning that Nigeria’s headline inflation rate rose for the first time in three months in September, following two consecutive months of decline. This increase in inflation was primarily driven by high petrol costs, which rose by 75 percent in the past month. Fuel prices in Nigeria have increased for the fourth time in 15 months. The hike in petrol prices is already impacting harvest gains, typically expected in the fourth quarter of the year. Inflation in Nigeria remains among the highest in the world and is expected to continue its upward trend, potentially affecting the CBN’s 2024 target of reducing inflation to 21 percent. We expect the CBN to maintain high interest rates or potentially raise them further. However, such a hike could worsen the difficulties businesses already face in staying afloat amid rising inflation without directly tackling the root causes of the inflationary trend. The CBN has already raised the country’s benchmark interest rate by 850 basis points to 27.25%, the highest on record. The rise in inflation could prompt another rate hike, marking the sixth increase in 2024. What remains to be seen is whether the usual end-of-year increases in inflation will occur this year or if the precipitous collapse in purchasing power will cause demand to flatline, resulting in a normal inflation curve rather than a spike.