Nigeria’s inflation surges to 33.88%, raising pressure on food, fuel prices

Nigeria’s inflation rate reached 33.88% in October 2024, up from 32.70% in September, as reported by the National Bureau of Statistics (NBS). This increase slightly exceeded analysts’ projections of 33.84% and underscores the mounting economic pressures as fuel prices, currency depreciation, and flooding in agricultural regions continue to impact consumer prices.

Key Contributors to Inflation

The inflation rate rose by 1.18 percentage points month-on-month, reflecting a significant increase in the cost of essentials, especially food. Food inflation reached 39.16% year-on-year in October, driven by rising prices in items like palm oil, vegetable oil, rice, and other staples. Flooding in the northern agricultural belt and fuel price hikes exacerbated these pressures, contributing to higher costs of food distribution.

Analysts from Meristem noted that core inflation, which excludes volatile items, rose to 28.64% in October from 27.43% in September. These analysts attributed the rise to increased transportation costs, fluctuating foreign exchange rates, and seasonal spending associated with upcoming holidays.

Expert Insights on Inflation Trajectory

Market analysts, including Lukman Otunuga from FXTM, noted that inflationary pressures had slightly eased in previous months but are climbing again due to persistent fuel hikes and supply chain disruptions. He pointed out that despite the Central Bank of Nigeria’s (CBN) consistent interest rate hikes—most recently to 27.25% in September—headline inflation may peak in the fourth quarter if the naira stabilizes.

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Prof. Uchenna Uzo from Lagos Business School commented that Nigeria’s inflation challenges are deeply rooted in energy prices and currency fluctuations, suggesting that continued interest rate increases may not fully resolve these issues. He anticipates inflation will remain in double digits into 2025, even with ongoing monetary tightening.

Regional Inflation Variances

The highest food inflation rates in October were reported in Sokoto (52.18%), Edo (46.55%), and Borno (45.85%), while Kwara (31.68%) and Kogi (33.30%) recorded the slowest increases. Month-on-month food inflation was highest in Adamawa at 5.08%, reflecting regional disparities influenced by varying degrees of food availability and transportation challenges.

Economic Outlook

With inflation expected to surpass 35% by December, the pressure on Nigerian households is anticipated to persist, as food, transportation, and rent costs continue to rise. Economists predict that achieving single-digit inflation will require addressing broader structural issues, including exchange rate stability, infrastructure improvement, and enhanced food security.

CBN’s Next Steps

Looking ahead, the CBN is expected to continue its aggressive interest rate stance to curb inflation, though experts warn that interest rate hikes alone may not be sufficient. Policymakers are urged to implement strategies that address root causes, such as foreign exchange stability and energy sector reforms, to prevent further erosion of purchasing power in the months to come.