Nigeria’s inflation rate surged to 27.33% in October, marking an increase from the previous month’s rate of 26.72%, as reported by the National Bureau of Statistics (NBS) on Wednesday.
The month-on-month analysis revealed a rise of 0.61 percentage points from September 2023.
On a year-on-year basis, the headline inflation rate was 6.24 percentage points higher than in October 2022, where the rate stood at 21.09%. This reflects a significant acceleration in inflationary pressures over the past year, underlining economic challenges.
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This upward movement in the headline inflation rate reflects the challenges faced by the Nigerian economy, with the soaring cost of living tied largely to food inflation. However, the data indicates that various economic factors, including policy changes and external influences, have influenced the inflation trajectory.
The food inflation rate for October 2023 quickened to 31.52% on a year-on-year basis, indicating a 7.80 percentage point increase compared to the rate recorded in October 2022 (23.72%). Factors contributing to this surge include the removal of subsidies on petrol and other government policies, impacting the prices of goods and services.
“The average annual rate of food inflation for the twelve months ending October 2023 over the previous twelve-month average was 26.33 percent, which was a 6.50 percent points increase from the average annual rate of change recorded in October 2022 (19.83 per cent),” the NBS noted.
The depreciation of the naira, by over 50% in both official and parallel FX markets, following the Central Bank of Nigeria’s decision to collapse all forex windows into the Investors and Exporters (I&E) window, has added to inflationary pressures.
Also, President Bola Tinubu’s announcement in May regarding the removal of the petrol subsidy has contributed to the current economic hardships faced by many Nigerians, with an attendant increase in the prices of essential goods and services.
The Central Bank of Nigeria (CBN) responded to the high inflation by raising its benchmark lending rate to 18.75% in July. The bank asserted that this rate hike had made a substantial difference in moderating the inflation rate. However, concerns remain about the impact of inflation on the cost of living and economic stability.
In response to the increasing food prices, President Tinubu declared a State of Emergency on food insecurity in July, emphasizing the inclusion of food and water availability and affordability within the purview of the National Security Council.
The agency indicated that the main contributors to the rise in the headline index at the divisional level were food and non-alcoholic beverages (14.16%), housing, water, electricity, gas, and other fuel (4.57%), clothing and footwear (2.09%), and transport (1.78%).
Other notable contributors include furnishings, household equipment, and maintenance (1.37%), education (1.08%), health (0.82%), miscellaneous goods and services (0.45%), restaurant and hotels (0.33%), alcoholic beverages, tobacco, and kola (0.30%), recreation and culture (0.19%), and communication (0.19%).
The report highlighted that on a month-on-month basis, the headline inflation rate in October 2023 was 1.73%, which was 0.37% lower than the rate recorded in September 2023 (2.10%). This indicates that the rate of increase in the average price level in October 2023 was less than the rate in September 2023.
Furthermore, the percentage change in the average Consumer Price Index (CPI) for the twelve months ending October 2023 over the average of the CPI for the previous twelve-month period was 23.44%, showing a 5.57% increase compared to the 17.86% recorded in October 2022, according to the report.
Experts have recommended to the central bank the option of lowering interest rates as a strategy to alleviate inflationary pressures. Despite these suggestions, there is an anticipation that the interest rate may undergo another upward review. It’s worth noting that previous increases in interest rates have not succeeded in effectively curbing the persistent rise in inflation.