Nigeria’s headline inflation rate saw its first decline in over a year, dropping to 33.40% in July 2024 from 34.19% in June 2024, according to the National Bureau of Statistics (NBS). This marks a significant shift, as inflation has been steadily rising since December 2022, when it last decreased to 21.34%.
The slight decrease of 0.79 percentage points in the headline inflation rate signals a potential stabilization in the country’s inflationary pressures, though inflation remains high compared to previous years.
The NBS report highlights that the headline inflation rate for July 2024 was still 9.32 percentage points higher than the 24.08% recorded in July 2023, showing that inflationary pressures continue to persist on a year-on-year basis.
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On a month-to-month basis, the inflation rate also saw a minor dip, with a 2.28% increase in July 2024 compared to the 2.31% rise in June 2024, reflecting a modest reduction in price increases for goods and services.
Key Contributors to Inflation
The most significant contributors to inflation in July 2024 were food and non-alcoholic beverages, which made up 17.30% of the year-on-year inflation, followed by housing, water, electricity, gas, and other fuels, contributing 5.59%. Despite the overall decline, these categories remain key drivers of inflationary trends in the country.
Core Inflation on the Rise
While headline inflation showed a slight decline, core inflation—which excludes volatile items like food and energy—continued to rise.
On a year-on-year basis, core inflation surged to 27.47% in July 2024, up from 20.47% in July 2023, marking an increase of 6.99 percentage points.
Month-on-month core inflation also increased slightly, rising to 2.16% in July 2024 from 2.06% in June 2024. The 12-month average for core inflation stood at 24.65%, compared to 18.84% in the same period the previous year.
Food Inflation Declines
Food inflation, a significant driver of overall inflation in Nigeria, showed signs of easing in July 2024. On a year-on-year basis, food inflation stood at 39.53%, up from 26.98% in July 2023, driven by higher prices of staples like semovita, yam flour, and wheat flour.
However, on a month-on-month basis, food inflation declined slightly to 2.47%, down from 2.55% in June 2024. The slowdown in food inflation can be attributed to a deceleration in the price increases of certain food items, such as tin milk, fresh fish, and garri.
Urban and Rural Inflation Trends
Inflation rates in urban and rural areas displayed different trends. The urban inflation rate for July 2024 reached 35.77% year-on-year, up from 25.83% in July 2023, while the month-on-month urban inflation rate remained nearly unchanged at 2.46%.
Rural inflation, on the other hand, was recorded at 31.26% year-on-year, compared to 22.49% in July 2023. On a month-on-month basis, rural inflation saw a slight decrease, falling to 2.10% in July 2024 from 2.17% in June 2024.
These numbers suggest that inflationary pressures are being felt more acutely in urban areas, though both urban and rural regions continue to experience high price increases.
Regional Breakdown of Inflation
On a regional basis, inflationary pressures varied across the country. The highest year-on-year inflation rates were recorded in Bauchi (46.04%), Jigawa (40.77%), and Kebbi (37.47%). In contrast, Benue (27.28%), Delta (28.06%), and Borno (28.33%) experienced the slowest year-on-year inflation.
However, on a month-on-month basis, Abuja, Borno, and Enugu recorded the largest inflation increases, while Taraba, Kwara, and Ondo saw the slowest price rises.
Food Inflation by Region
For food inflation, Sokoto (46.26%), Jigawa (46.05%), and Enugu (44.06%) led the way in year-on-year increases, while Adamawa, Bauchi, and Benue saw the slowest growth. Month-on-month, the states of Borno, Sokoto, and Enugu recorded the highest food inflation increases, while Kwara, Taraba, and Ondo saw the slowest month-on-month growth in food prices.
The drop in inflation comes at a critical juncture as the Nigerian government continues its efforts to stabilize the economy. Among its recent interventions are zero percent import duty and exemption of value-added tax (VAT) on several essential food items, which was announced last month.
This initiative is set to run until December 31, 2024, and is aimed at alleviating the high cost of basic commodities like maize, millet, rice, and wheat in the Nigerian market. The core objective of the policy is to reduce the price of staple foods that have become increasingly expensive due to inflationary pressures, supply chain disruptions, and a declining local agricultural output.
However, the decline in inflation rates is considered too little to effect a significant reduction in the cost of goods and services.
The overall slight decline in inflation rates may signal the beginning of a stabilization phase, but with inflation still elevated compared to historical norms, economists are advocating continued policy measures to ensure that the country can sustain these improvements and support both businesses and consumers through this period of economic recovery.