Nigeria’s inflation rate has scaled to an 18-year high, matching the record level witnessed in 2005, according to the latest report from the National Bureau of Statistics released on Friday.
The consumer prices index surged by 28.2% year-on-year in November, compared to the 27.3% recorded in October.
This unsettling milestone, marked by a 2.1% rise in prices within the month, poses significant challenges to Africa’s largest economy, where over 40% of the population grapples with extreme poverty.
The inflationary spike can be traced back to a series of economic shocks, notably the easing of foreign exchange restrictions in June that caused a 45% depreciation of the naira.
Concurrently, the discontinuation of a fuel subsidy a month earlier led to a nearly tripled cost in transportation.
Food inflation, a critical component affecting the majority of Nigerians, accelerated to 32.8% in November from 31.5% in October.
Meanwhile, core inflation, which excludes volatile elements like farm produce and energy costs, witnessed a marginal slowdown to 22.4% from 22.6%.
The Central Bank of Nigeria, headquartered in Abuja, is under increasing pressure to address this economic turmoil.
To restore price stability, the central bank is anticipated to raise its key interest rate for the ninth consecutive time when it convenes next year.
Since May 2022, the bank has already implemented rate hikes totaling 725 basis points, reaching 18.75%.
Analysts, including Yvonne Mhango from Bloomberg Economics, foresee Nigeria’s inflation peaking at 30% in the first quarter of 2024.
Mhango suggests that a rate hike of 500 basis points in the first half of 2024 could help the central bank restore positive real rates by August, attracting foreign financial inflows to stabilize the naira and converge exchange rates.
As Nigeria grapples with this economic challenge, policymakers face the delicate task of balancing inflation control with measures that safeguard the well-being of a population already burdened by extreme poverty.