Triple whammy
Nigeria's inflation rose to 34.8% in December 2024, with food inflation at 39.84%, amid telco tariff hikes and petrol price increases.
Nigeria’s headline inflation rose marginally to 34.80% in December 2024, up from 34.60% in November, driven by festive season demand. This marks a 5.87% increase compared to December 2023. Food inflation surged to 39.84% year-on-year, with an annual average of 39.12%, up from 27.96% in 2023. Meanwhile, the Nigerian Communications Commission (NCC) approved a 50% tariff hike for telcos, citing market conditions. Additionally, the Nigerian National Petroleum Company (NNPC) raised petrol prices from ₦965 to ₦990 per litre in Abuja and from ₦925 to ₦965 in Lagos, following higher costs from the Dangote Refinery and depot owners.
Nigeria's economic landscape has been increasingly shaped by high inflation and mounting financial pressures across critical sectors, including telecommunications. Average headline inflation for 2024 is a staggering 32.2%, a sharp rise from 24.5% in 2023. This marks the highest inflation rate since 1995 and significantly exceeds the Central Bank of Nigeria's (CBN) target rate of 21%. For comparison, Kenya and Ghana recorded inflation rates of 4.3% and 20.9%, respectively, underscoring Nigeria's precarious position.
High inflationary pressures have eroded consumers' purchasing power, reduced demand, and exacerbated poverty. According to the World Bank, approximately 14 million Nigerians fell into poverty in 2024, highlighting the human cost of the ongoing economic strain. While food inflation in December 2024 dropped slightly to 39.1%, the yearly average remains alarmingly high, up from 27.8% in 2023. This persistent surge is attributed to insecurity, supply chain disruptions, climate change, elevated energy prices, floods, a weaker naira, and rising farm input costs, stunting agricultural growth and limiting it to below 3%.
The consequences extend beyond households, as the agricultural sector’s limited productivity threatens food security. A recent Farming Early Warning System Network report forecasts further deterioration in food security from November 2024 through May 2025, driven by suboptimal harvest yields. This dire prediction emphasises the urgent need for measures to boost food production, provide palliatives, and grant import waivers to mitigate supply shortages. Although the government has implemented various strategies to tackle inflation, such as monetary policy tightening and exchange rate adjustments, their impact has been minimal. Critics have dismissed President Bola Tinubu's goal of reducing inflation to 15% as unrealistic, particularly in light of the Consumer Price Index (CPI) rebasing exercise, which has been met with scepticism.
Nigeria's telecommunications sector faces challenges beyond inflation’s toll on households. Over the past decade, telecom operators have consistently advocated for a review of tariff structures to reflect rising operational costs. In 2022, they proposed a 40% rate increase, a request that has gained renewed urgency following significant financial losses caused by the naira’s devaluation in June 2023. Telecommunications services, including data subscriptions and telephone calls, constitute a considerable portion of household expenses. A tariff increase would further strain consumers already grappling with high inflation. Proponents of higher tariffs argue that this adjustment is necessary to reinvest in the sector, which has experienced declining investment and deteriorating network quality in recent years. For instance, MTN Nigeria's core capital expenditure fell by 27.79% to ₦217.64 billion between January and September 2024, while Airtel's investment dropped by 36.59% to $149 million over the same period.
These declines underscore the need for urgent financial intervention to sustain the industry. Despite public concerns about the potential impact of tariff increases, telecom operators and the Association of Licensed Telecommunications Operators of Nigeria (ALTON) have effectively communicated the long-term benefits of such adjustments. Their advocacy has gained traction, with media narratives across print, online, and social platforms highlighting the potential for improved network quality and sector sustainability.
The intersection of rising inflation and pressures on critical sectors like telecommunications paints a concerning picture of Nigeria's economy. On one hand, households face diminished purchasing power and heightened poverty due to soaring food and energy costs. On the other, industries essential to modern life, such as telecommunications, struggle to remain viable amidst declining investments. Addressing these challenges requires an integrated approach that balances short-term relief for households with long-term investments in key sectors. The government must provide targeted interventions, such as palliatives and import waivers, to alleviate immediate pressures and create an enabling environment for private sector growth and sustainability. Without coordinated efforts, the economic strain on households and industries alike could deepen, hindering Nigeria’s path to recovery and growth.