Nigeria inflation soars again – driving more people into poverty

Nigeria’s inflation rate soared for the 10th straight month to an 18-year high in October, driven by weaker naira, low food production and the removal of fuel subsidies.

Consumer prices increased by 27.3% from the same month last year, up from 26.7% in September, according to data published on Wednesday by the National Bureau of Statistics (NBS).

The rate of price rise between October and September was 1.7%.

Price rises for food and non-alcoholic beverages were the biggest driver of inflation in October in annual terms, the statistics agency said. Food inflation rose to 31.52% in October from 30.64% in September.

The high inflation means more Nigerians will become poor. The World Bank said in June that Nigeria’s accelerating inflation pushed an additional 4 million Nigerians into poverty in the first five months of 2023 alone.

The bank said the loss of purchasing power from high inflation increased poverty in the short term, basing its report on the statistics bureau’s data showing that 89.8 million Nigerians fell below the poverty line at the start of 2023, with an additional 4 million making it 93.8 million by May.

This accounts for 43% Nigeria’s 216 million people.

“Inflation pushed an estimated four million more Nigerians into poverty in the first five months of 2023, and average prices of locally produced staples have increased faster than average inflation,” the World Bank said in a report.

CBN and interest rate pressure

The rise in inflation puts pressure on the central bank to raise interest rates. The bank’s monetary policy committee met last in July, when it opted for a smaller-than-expected 25 basis point hike.

New governor Olayemi Cardoso, who took office in September, has pledged to focus more on price stability, than much-criticised fiscal interventions pursued by his predecessor Godwin Emefiele who printed over N23 trillion for the federal government in eight years.

Inflation in Nigeria, with more than 60% of the population poor, has been in double digits since 2016, eating away people’s incomes and savings.

Inflationary pressure has increased more since June following the easing of foreign exchange restrictions, which caused the naira to plunge by 45% against the US dollar. The removal of a fuel subsidy in May further exacerbated the situation, leading to an almost threefold increase in transportation costs.

The surge in inflation will continue to have a significant impact on Nigerian households, particularly those on low incomes. The price of food and other essential goods has already risen sharply, and this is likely to continue in the coming months.

The CBN’s decision on whether or not to raise interest rates will be closely watched by markets and policymakers alike.

“We are reaching almost four months since the central bank’s last policy meeting in July, a meeting which underwhelmed,” David Omojomolo, Africa economist at research firm Capital Economics, told Reuters.

“The central bank will need to act with aggressive hikes to maintain its credibility and bring down inflation.”