Economists have pinpointed the soaring inflation rate in Nigeria to a combination of factors, including the ongoing depreciation of the naira and skyrocketing fuel prices.
The latest figures released by the National Bureau of Statistics indicate a troubling trend, with inflation surging to 29.90% in January 2024 from the previous month’s 28.92%.
“This rise is due to a combination of factors including a weaker naira, high diesel prices, cost of logistics, and the cross-elasticity effect on domestic commodities (substitutes),” stated Bismarck Rewane, CEO of Financial Derivatives Company Limited.
The impact of this inflationary pressure is palpable across various sectors, with food and non-alcoholic beverages contributing significantly to the spike. Necessities such as bread, cereals, potatoes, yams, oils, fats, fish, meat, and fruits have witnessed substantial price hikes, exacerbating the cost of living for ordinary citizens.
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“The major inflation drivers are not receding, if anything, they have become even more intense,” expressed Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises. “These include the depreciating exchange rate, surging transportation costs, logistics challenges, forex market illiquidity, astronomical hike in diesel cost, insecurity in farming communities, and structural bottlenecks to production.”
The persistently high inflation rate poses significant challenges for both consumers and businesses alike. Consumers are grappling with diminished purchasing power, while businesses face mounting production costs, leading to dwindling profitability and investor confidence.
In response to these alarming figures, there is mounting pressure on the Central Bank’s Monetary Policy Committee to take decisive action. Analysts anticipate a substantial increase in the monetary policy rate during the upcoming meeting on February 26-27, with projections ranging from 200 to 250 basis points.
“Regrettably, the high-interest rates for borrowing remain a significant obstacle for manufacturers,” remarked Dr. Alias Aliyu, highlighting the reluctance of businesses to engage in production activities amidst the current economic climate.
Despite government assurances and promises to address the economic crisis, including the release of grains for the poor, the underlying issues driving inflation persist. The need for structural reforms to enhance food production, strengthen the supply chain, and bolster investor confidence has never been more pressing.
As Nigeria grapples with the repercussions of soaring inflation, there is a growing sense of urgency for policymakers to implement robust measures aimed at stabilizing the economy and alleviating the burden on its citizens.
Failure to address these fundamental challenges could further exacerbate poverty levels and undermine long-term economic prosperity.