Nigeria's Inflation Rate Hits its Highest Level in Decades

Nigeria's headline inflation rate for April 2024 has reached a staggering 33.69%, the highest level since March 1996, and there seems to be no end in sight concerning the skyrocketing cost of living. This is despite the federal government's efforts to stabilise the Naira by clamping down on illegal BDC operators. The continued increase has continued to raise concerns among economists and citizens alike. What does this mean for ordinary Nigerians? See 13 Ways to Fight Inflation & Food Crisis in this practical guide.

The Nigeria Bureau of Statistics (NBS) April 2024 report shows a 0.49-point increase from the 33.20% recorded in March and 11.47% points higher than in April 2023, where it stood at 22.22% year-on-year.  However, on a month-to-month basis, the inflation rate for April 2024 was 2.29%, which is 0.73% lower than the 3.02% recorded in March. This suggests that the rate at which prices increased in April 2024 was slower than the rate in March 2024. This could be an indication that the efforts of the Central Bank of Nigeria in curbing inflation may be yielding results.

Breakdown of the Inflation Report

 Food Inflation:

In April 2024, the food inflation rate (which to many is the most important aspect of the inflation report) reached 40.53% on a year-on-year basis, marking a substantial increase of 15.92 percentage points from the 24.61% recorded in April 2023. This significant rise in food inflation can be attributed to higher prices for stable foods such as garri, rice, yam tubers, bread, and prepacked wheat flour, among other cereals. For the year ending in April 2024, the average annual rate of food inflation stood at 32.74%, representing an increase of 9.52 percentage points over the 23.22% average annual rate recorded in April 2023.

Core Inflation:

Core inflation, which excludes the prices of volatile agricultural products and energy, reached 26.84% in April 2024 on a year-on-year basis, an increase of 6.87% from the 19.96% recorded in April 2023. The most significant price rises were observed in actual and imputed rentals for housing, passenger transportation within a city, Medical Services, and accommodation services. On a month-on-month basis, the core inflation rate was 2.20% in April 2024, down from 2.54% in March 2024, representing a decrease of 0.34%. The average annual core inflation rate for the twelve months ending in April 2024 was 22.84%, which is 5.15 percentage points higher than the 17.70% recorded in April 2023.

Urban Inflation:

In April 2024, the urban inflation rate on a year-on-year basis reached 36.00%, which is 12.61 percentage points higher than the 23.39% recorded in April 2023. On a month-on-month basis, the urban inflation rate for April 2024 was 2.67%, showing a decrease of 0.50 percentage points from the 3.17% seen in March 2024. The average urban inflation rate over the twelve months ending in April 2024 was 30.02%, marking an increase of 8.53 percentage points from the 21.50% reported in April 2023.

Rural Inflation:

In April 2024, the rural inflation rate was 31.64% on a year-on-year basis, which is 10.50 percentage points higher than the 21.14% seen in April 20234.

 

Implications of a High Inflation Rate

 A high inflation rate like this, as we have continued to have over the years, is having far-reaching consequences on the economy and citizens' purchasing power, among others:

Reduced Purchasing Power:

As prices rise, the value of money decreases, making it harder for individuals to afford necessities with the same amount that they would have afforded them years ago.

Increased Cost Of Living:

Higher prices for food, housing, and other essentials have led to a decreased standard of living. Households are reducing their standard of living to meet up with present-day reality by skipping meals and reducing the quality of the meals.

Uncertainty for Businesses:

High inflation can make it difficult for businesses to predict costs and invest in the future. As a result, it leads to job losses and even closure of businesses.

 Furthermore, see the 7 Ways High Inflation Affects Your Income and the Economy, a practical guide on how to beat high inflation, and protect yourself and your income.

Causes of High Inflation Rate

Despite the decision of the Central Bank of Nigeria on monetary policy to tighten interest rates and the money supply, the inflation rate has continued on an upward trajectory. This only goes to show that there are several other factors other than the CBN’s monetary policy that contribute to Nigeria's high inflation rate, including:

Supply and demand imbalances:

Shortages or excesses of essential goods such as foodstuffs and services have been the main drivers of the hike in prices.

Insecurity:

Nigeria cannot fix its food shortage problems until it has fixed the issue of insecurity in most parts of the country, especially the northern part, where the bulk of the food is cultivated.

External Factors:

The continued advancement of technology and the internet has indeed reduced the world to an interdependent global village. The Nigerian government must find a way to protect and provide for its citizens by ensuring that the farms and every citizen are protected to improve local production and self-reliance; otherwise, global events such as the COVID-19 pandemic, wars, and other disruptions that disrupt trade will lead to price increases for Nigerians and other import-dependent countries.

Naira Instability:

For an import-dependent country like Nigeria, the stability of the local currency is key to stable pricing. With the Naira trading at over N1,300.00 to the USD and patrol (fuel) at over N850 per litre, it is impossible to bring the prices of goods and services down. See how to; Mitigating the Impact of Fuel Subsidy Removal in Nigeria in this insightful article.

 

Conclusion

Nigeria's inflation rate for April 2024 is truly a cause for concern, and policymakers need to address the underlying factors driving this increase.  The FGN needs to go beyond implementing effective monetary and fiscal policies to fix the main root causes of high inflation in the country.  Nigeria can work towards more stable economic policies by creating a more conducive environment for businesses, improving security, and ensuring the stability of the Naira.

Recommended Article For You: Discover the 3 Types of Money & How Each Can Boost Your Wealth

FAQs

How does inflation affect me?

Inflation can erode the purchasing power of your money. This means that the same amount of money will buy you fewer goods and services over time. The impact of inflation will vary depending on your circumstances.

What impact is the April 2024 inflation having on Nigerian households?

The April 2024 inflation is severely impacting Nigerian households by increasing the cost of living, making it more challenging for families to afford necessities such as food, shelter, and energy.

What measures are being taken to address the high inflation rate in Nigeria?

The Nigerian government and Central Bank are implementing various measures, including monetary tightening, subsidies, and efforts to stabilize the currency to address the high inflation rate.

How does Nigeria's April 2024 inflation rate compare to other countries?

Let's compare Nigeria's inflation rate with that of some other countries. Keep in mind that inflation rates can vary significantly based on various factors such as economic policies, supply and demand dynamics, and geopolitical events. Here are some recent inflation rates from different countries: 1. United States (U.S.): As of April 2024, the U.S. headline inflation rate (Consumer Price Index for All Urban Consumers, or CPI-U) was 5.4% on a year-on-year basis. This is significantly lower than Nigeria's inflation rate for the same period. 2. United Kingdom (U.K.): In the U.K., the Consumer Prices Index (CPI) inflation rate reached 5.1% in March 2024. The U.K. has also experienced elevated inflation, but it remains below Nigeria's current rate. 3. India: As of March 2024, India's Consumer Price Index (CPI) inflation rate was 6.0% on a year-on-year basis. While higher than the U.S. and U.K., it is still lower than Nigeria's inflation rate. 4. Turkey: Turkey has been grappling with hyperinflation. As of April 2024, the country's inflation rate surged to 85.51% on a year-on-year basis. This is significantly higher than Nigeria's rate. 5. Venezuela: Venezuela has been experiencing a severe economic crisis, including hyperinflation. As of March 2024, the country's annual inflation rate reached an astonishing 1,743%. However, it's essential to note that Venezuela's situation is unique and extreme. 6. Eurozone: The Eurozone (the group of countries using the euro as their currency) had an inflation rate of 5.8% in April 2024, which is the highest rate since 2008. This rate is higher than both the U.S. and U.K. but still below Nigeria's current rate.

What is the forecast for Nigeria's inflation in the coming months?

The forecast for Nigeria's inflation in the coming months remains uncertain, with expectations of continued volatility depending on global economic conditions and domestic policy responses.

What sectors are most affected by Nigeria's April 2024 inflation?

The sectors most affected by Nigeria's April 2024 inflation include agriculture, energy, and manufacturing, all of which are experiencing cost pressures that are being passed on to consumers.