Economy
Nigeria’s inflation rate hits highest rate, as forex hits all-time low
Africa’s largest economy is currently battling a paradox of inflation, which has hit the highest rate in almost 30 years, and foreign exchange.
The Naira of recent tremendously gained against the Dollar, hitting an all-time low in seven months in the country.
According to a report released by the National Bureau of Statistics (NBS), inflation jumped to 33.2% in March.
The development followed a 1.5% increase from February, bringing it to its highest level in nearly three decades.
According to NBS, food was the main driver of inflation, as commodities like bread, grains, meat and oil soar higher.
NBS Nigeria, reported on its X, formerly Twitter, handle, @NBS_Nigeria, on Monday:
“In March 2024, the headline inflation rate increased to 33.20% relative to the February 2024 headline inflation rate which was 31.70%.”
The report also noted that “food inflation was 40.01% in March 2024”.
Naira versus inflation
Nigeria’s local currency, Naira, had strengthened but the success has yet to reflect in the price of goods and services.
According to report published by Diaspora Digital Media (DDM) on Tuesday, the Dollar hits all-time low in seven months at the parallel market.
The Naira exchanged for a record low of ₦1100.00 to the Dollar, while the Pound goes for ₦1350.00.
Reacting to that development, Mr. Shehu Sani, a Nigerian Senator, lamented that whereby the “Dollar obeyed the law of gravity” and slid downwards, food prices are yet to do same.
Senator Sani made the remarks on his X account, @ShehuSani, on Tuesday. He tweeted:
“What goes up must come down; Dollar obeyed the laws of gravity while food prices are still hanging high up.”
What are the primary drivers of inflation?
Nigeria’s inflation rate reached the fresh height in February 2024 last witnessed in 1996, up from 29.9% in January.
This increase exceeded market forecasts of 31%. The primary drivers of this inflation surge include:
Oil Subsidy Removal
The removal of oil subsidies impacted prices as prices of commodities soared to unprecedented levels.
Naira Devaluation
Between June 2023 and February 2024, Naira depreciated by 69%, causing high costs for importers and producers.
Food Insecurity
Instability in food-producing areas, deteriorating rural infrastructure, and climate change contributed to rising food prices.
The annual core inflation rate, excluding farm produce, also jumped to a multi-year high.
The Consumer Price Index (CPI) in Nigeria measures price changes for 740 goods and services consumed daily.
Key categories in the CPI consumed for day-to-day living include food, housing, clothing, transportation, health, etc.
What are other contributing factors?
Rising energy costs has also contributed to the menace.
Many manufacturers are paying a premium to power their production lines and transport goods within the country.
Two weeks ago, the federal government increased electricity tariffs by over 300% for some consumers.
The affected consumers include businesses and households who use large amounts of energy in high-end areas.
This, according to the Power Minister, is in a bid to reduce electricity subsidy payments and increase savings.
Some Nigerians who belong to these categories, however, have noted that their electricity bills have also shot up.
Recently, the Central Bank of Nigeria (CBN) increased borrowing rates to shrink access to capital and curb inflation.
Positive effects of this decision are also yet to be felt in the open market as more people are forced into poverty.
Presently, many Nigerians are struggling to manage their scanty resources, purchasing power and eroded savings.
The astronomic inflation rate has raised questions about the seemingly inept Bola Ahmed Tinubu-led government.
The government, however, claims its economic policies will eventually curb inflation and stabilise the economy.
What the government must do
A tweep, Free guy, @Affinity3363, while responding to Shehu Sani’s tweet, has advised the government on what it must do to stem the tide of inflation.
Free guy tweeted: “Naira gaining does not reduce food prices.
“Yes, it’s good for reduction in flight tickets, buying stuff from abroad etc.
“To get food cheaper, the following must be done:
- Fuel price has to reduce to at least N300 per liter.
- Custom duties must reduce.
- Electricity tariffs must reduce. We use electricity to mill rice. If none, we use fuel, which reverts to point 1.
- Insecurity in our farms must be addressed.
If our farmers nationwide can’t farm, where will you see food from, the scarce food you see gets expensive due to demand and supply issues. - When those foods are even produced, cost of transporting to each state is expensive. (Once again point 1).
- Abolish all taxes on food items like “produce tax”.”
He concluded by saying that the “Dollar/ Naira dance has little effect at the moment.”
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