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- Nigeria’s inflation rate reached 33.88 per cent in October 2024
- The increase is 1.18 per cent higher than the 32.70 per cent recorded in September 2024
- The increase is due to factors such as soaring food and fuel costs, forex volatility and excess liquidity
Nigeria’s inflation rate surged to 33.88 per cent in October 2024, a 1.18 per cent month-on-month increase from the 32.70 per cent recorded in September 2024.
According to the Consumer Product Index (CPI) report released by the National Bureau of Statistics (NBS) on Friday, November 15, the headline inflation is 6.55 percentage points higher than the 27.33 per cent recorded in October 2023.
The NBS said the food inflation rate in October 2024 was 39.16 per cent, compared to 37.77 per cent in September 2024.
The food inflation rate rose to 2.94 per cent on a month-on-month basis, a 0.30 per cent increase from the 2.64 per cent recorded in September 2024.
The surge in the inflation rate in October is worrisome, seeing that the rate tapered to 33.40 per cent in July after 19 months of increase that saw the rate reach a new 28-year all-time high of 34.19 per cent in June. The rate declined further for the second consecutive month in August to 32.15 per cent before increasing to 32.70 per cent in September 2024.
The increase in inflation in October has been attributed to several factors, including higher food prices, increased transportation costs due to fuel price hikes, volatility in the foreign exchange (forex) market, and an increased money supply.
Factors that pushed the October inflation rate to 33.88 per cent
1. Higher food prices
The soaring prices of food items are major drivers of Nigeria’s inflation. In the last few months, the prices of food and services have more than doubled on the back of many other snowballing factors such as higher transportation costs and forex volatility.
For the October inflation rate, the NBS said the rise in food inflation to 39.16 per cent is due primarily to the rate of increase in the average price of palm oil, vegetable oil, etc. (oil and fats class), mudfish, croaker (apo), fresh fish (obokun), etc. (fish class), dried beef, goat meat, mutton, skin meat, etc (meat class) and bread, guinea corn flour, plantain flour, rice, etc. (bread and cereals class).
The food price hike is compounded by the high cost of farm inputs, insecurity, and flooding in the country's food-producing belt.
2. Fuel price hike
Another factor pushing Nigeria's October inflation rate to 33.88 per cent is the increase in fuel prices, which has resulted in higher transportation costs.
Since the infamous fuel subsidy removal in May 2023 by President Bola Tinubu, fuel prices have continued to soar. The price of fuel increased from an average of N238.11 in May 2023, to over N1,000 in October 2024. The NNPCL recently announced the latest hike in fuel price, the second time in two months, with prices now approximately N998 in Lagos from N885 and N1,030 in Abuja from N897. The price has also been adjusted to N1,025 in Lagos and N1,060 in Abuja.
3. Forex volatility
The volatility experienced in the forex market is another factor fuelling inflation in Nigeria. To address the parity between the official and parallel forex market rates, the CBN floated the naira in June 2023, allowing market forces to determine the currency’s value on a willing-buyer-willing-seller model.
The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has often said the multiple exchange rate windows encouraged arbitrage, reduced foreign investment and led to a backlog in forex settlements with revenue losses estimated at N6.2 trillion in 2022 alone.
The naira floating has also put pressure on the currency as it has continued to depreciate. It lost 40 per cent of its value in the first half of 2024 and recently depreciated by 43 per cent and is one of the worst-performing currencies on the African continent.
The currency has seen exponential increases, jumping from the N769.25/$ it traded on June 20, 2023, at the Investors and Exporters (I&E) to N1,652.25/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window as of November 15, 2024.
On the other hand, at the parallel market, the currency moved from N770/$ in June 2023 to N1,750/$.
4. Increased money supply
Another factor that heightened Nigeria’s inflation rate in October is the increase in money supply (M3), which typically encompasses both net foreign assets and net domestic assets and gives a holistic view of a nation’s monetary dynamics.
In September 2024, the money supply (M3) in Nigeria increased by 62.8 per cent year-on-year from N66.94 trillion in September 2023 to N108.96 trillion.
On a month-on-month basis, the money supply grew by 1.6 per cent from N107.19 trillion in August 2024.
Increased money supply means excess liquidity in an economy. To curtail this, the CBN’s Monetary Policy Committee (MPC) has maintained a tight stance, increasing the Monetary Policy Rate (MPR) or interest rate by 50 basis points (bps) to 27.25 per cent after its 297th meeting held September 23 and 24 from 26.75 per cent in July.
Many, including analysts and economists, have criticised the MPC's monetary tightening stance, which they tag as ‘textbook economics.’
The excess liquidity in the economy may have confirmed their stance as the money supply has been in defiance of the MPC’s stance.
Inflation: Nigerians to spend 54.9% income on food in next 6 months, projects CBN
Meanwhile, TheRadar reported that according to a recent survey by the Central Bank of Nigeria (CBN), the escalating inflation rate in Nigeria is expected to lead households to dedicate the largest portion of their earnings to food expenses over the next six months.
The survey, conducted from July 22 to 26, 2024, reveals that the inflation rate has surged to 33.40 per cent, with food inflation exceeding 40 per cent.
