Fast and slow

Nigeria’s inflation rate increased to 34.6% in November, up from 33.8% in October, according to the National Bureau of Statistics. The Consumer Price Index (CPI) report shows a 0.72% rise from the previous month. Economic activities also contracted for the second consecutive month, as reflected in the November Purchasing Managers Index (PMI) of 48.9 points, signalling a slowdown. Of 36 sub-sectors in industry, services, and agriculture, only 14 reported growth, while 22 declined. Key metrics like output (49.6), new orders (48.1), employment (49.0), and raw materials (48.8) recorded declines, with suppliers’ delivery times also slowing to 49.1 points.

Nigeria’s inflation rate has maintained an upward trajectory since September 2019, following former President Buhari’s ill-advised decision to shut the country’s land borders to curb the smuggling of food and petroleum products. This policy started a troubling trend. For context, inflation stood at 11% in August 2019, the lowest reading since January 2016. Since then, inflation has wreaked havoc on the Nigerian economy and the well-being of its citizens, eroding the value of savings and investments, reducing purchasing power and driving up interest rates. By November 2024, Nigeria’s consumer price index (CPI) reflected the grim reality of this sustained inflationary pressure, averaging 33% over the past three months. Food inflation followed a similar pattern, averaging 39%, further exacerbating the cost-of-living crisis. 

Compared to its African peers such as South Africa, Kenya, and Ghana—which also reported rising inflation rates—Nigeria’s inflation remains the highest in Sub-Saharan Africa. Rising inflation has deepened poverty across the country, with the World Bank estimating that at least 129 million Nigerians now live in poverty. The situation is dire: nearly 97% of household income is spent on food, leaving little room for other essentials. According to the recent National Bureau of Statistics data, almost two-thirds of Nigerian households now skip meals regularly. The economic impact of inflation extends beyond households to the business sector. The country’s Purchasing Managers’ Index (PMI), a key indicator of economic health, has struggled to stay above the 50-point threshold—the level that signals expansion compared to the previous month. In November 2024, the PMI stood at 48.9, marking the second consecutive month of contraction. Key metrics such as output (49.6), new orders (48.1), employment (49.0) and raw materials (48.8) also recorded declines. Suppliers’ delivery times slowed to 49.1 points, reflecting the broader economic strain. Similarly, the Stanbic IBTC Bank PMI for November reported a score of 49.6, indicating a persistent slowdown in business activity since July 2024.

The effects of these contractions are far-reaching. Reduced business activity hinders job creation and retention, compounding the country’s unemployment crisis. In 2023 alone, Nigeria experienced four instances of business activity shrinkage, and current trends suggest further deterioration. Contractions in PMI reflect weakened economic growth, which translates directly into increased poverty and joblessness for millions of Nigerians. President Tinubu has set an ambitious target of reducing inflation to 15% by the end of 2025. However, aside from relying on the high base effect, his administration has yet to provide detailed strategies to achieve this goal. Without a comprehensive plan to address rising costs, high foreign exchange pressures, and the Central Bank’s elevated interest rate of 27.50%, businesses and households will continue to bear the brunt of economic hardship. Nigeria’s inflation crisis demands urgent and holistic solutions. Boosting food production, ensuring price stability and supporting businesses through targeted interventions are critical steps to reversing the current trajectory. Only then can the country achieve sustainable economic growth and provide its citizens with much-needed relief.