Inflation storm rages on in Nigeria as October rate hits 33.88%

Onome Amuge

The Nigerian economy has been in a perpetual state of turbulence, with new economic troubles surfacing every week. One such persistent problem is inflation, which continues to rise and constrict the financial breathing room of every Nigerian citizen.

Nigeria’s economy staggered under the increasing burden of inflation in October 2024 as the prices of essential goods and services, including food, electricity, and fuel soared, pushing the inflation rate to 33.88 per cent from September’s 32.70 per cent.

The October 2024 inflation data presented recently by the National Bureau of Statistics (NBS) indicated that the headline inflation rate jumped by 1.18 percentage points month-on-month.

The escalation in inflation is even more concerning when viewed from a year-on-year perspective, with October 2024’s headline inflation rate registering a 6.55 percentage point increase compared to October 2023’s 27.33 per cent.

The food inflation monster continues to stalk Nigerians, as the country’s food inflation rate surged to 39.16 per cent on a year-on-year basis in October 2024, a  7.64 percentage point jump from 31.52 percent in October 2023.

Rampant price hikes in staple foods such as guinea corn, rice, maize, yam, palm oil, and other essential items, once again took a devastating toll on the economic well-being of the average Nigerian.

Adding to the financial woes of Nigerians, the food inflation rate soared to 2.94 percent on a month-on-month basis in October 2024, a 0.30 per cent increase from September 2024’s rate of 2.64 per cent.

According to the NBS report, hikes in essential food items such as palm oil, vegetable oil, fish, dried beef, goat meat, mutton, bread, guinea corn flour, plantain flour, and rice, contributed to a spiraling cost of living for Nigerians struggling to keep their heads above water in an economy marred by uncertainty.

As inflation continues to erode the purchasing power of millions of Nigerians and threaten the economic stability of the country, the Bola Tinubu administration appears powerless in the face of this unrelenting economic hurricane.

With the clouds of inflation darkening the economic horizon, the government’s inability to steer Nigeria out of this inflationary storm has left the future of millions hanging precariously, as the government struggles to secure the prosperity of his citizens.

As it stands, analysts and industry stakeholders are observing a disturbing trend, as the current administration’s policy missteps appear to be amplifying Nigeria’s economic woes.

The government’s hollow promises of reform have been accompanied by a lack of accountability, systemic corruption, and mismanaged resources—a trifecta of factors that have thwarted the country’s economic growth and kept a stranglehold on opportunities for the majority of Nigerians.

Manufacturing sector suffers as inflation mows down profits 

In a bleak reminder of the devastating effects of inflation on the country’s economic health, the Manufacturers Association of Nigeria (MAN) recently reported a 357.57 percent increase in unsold inventory during the first half of 2024, amounting to N1.24 trillion worth of unsold goods.

MAN, in its latest report on the country’s economic performance, attributed the record-high value of unsold to the deteriorating purchasing power of Nigerians in the first half of 2024.

The association reported that its woes continue to mount as a toxic brew of economic challenges chip away at the industry’s foundations. Inflation, combined with the removal of fuel subsidies and the naira’s diminished value, has taken a heavy toll on consumer spending power, stunting demand for manufactured goods and causing a staggering increase in unsold inventory.

Adding insult to injury, the association revealed that the sector’s job creation has also slowed to a crawl, with fewer employment opportunities available in the first half of 2024.

According to the data, only 2,606 jobs were created during this period, representing a 37.83 percent decline from the previous year.

Not only has Nigeria’s manufacturing sector been battered by spiraling inflation, but its output has also taken a significant hit despite the nominal value of production rising to an all-time high.

While the nominal value of production increased by a whopping 30.38 percent to N5.34 trillion, real manufacturing output actually shrank by 1.66 percent year-on-year, plummeting to N1.34 trillion in the first half of 2024.

The hurdles facing Nigeria’s manufacturing sector seem to grow taller by the day, with increases in electricity tariffs, rising diesel and gas prices, and the unreliability of the national power grid conspiring to hamper the sector’s growth and profitability.

The Manufacturers Association of Nigeria report revealed that the 200 per cent increase in electricity tariffs in H1 2024 sent operational expenses skyrocketing, necessitating a 7.69 per cent investment in alternative energy sources that reached N238.31 billion.

The deteriorating purchasing power of consumers, a byproduct of rampant inflation, fuel subsidy removal, and a plummeting naira, was identified by Francis Meshioye, MAN’s president, as the chief culprit behind the staggering increase in unsold inventory in the manufacturing sector.

“The high levels of unsold inventories reflect the challenges faced by consumers and the need for interventions to stimulate demand and improve the sector’s performance,” he stated.

Meshioye, in his assessment of the manufacturing sector’s woes, pinpointed the sector’s mounting inventory and dwindling employment levels as signs of a sector in crisis.

This is as economic uncertainty, persistent inflation, and a hostile business environment conspire to create an unnavigable economic landscape for manufacturers, who are left with dwindling options to keep their operations afloat.

Hawkish monetary policy beckons amidst persistent inflation hike

The rising tide of inflation has put the Central Bank of Nigeria (CBN) on the defensive, with Africa economist David Omojomolo warning that the only viable path forward may be continued rate hikes.

This comes as the Monetary Policy Committee (MPC) has already raised rates at 13 straight meetings in a row, from 11.5 percent in May 2022 to the current 27.25 percent, a bid to stem the rising tide of inflation and halt its destructive march.

“We now expect the monetary policy committee to choose to hike rates by 100 basis points on Nov. 26, with Governor Olayemi Cardoso likely to have been spooked by the reversal in the disinflation process,” Omojomolo stated.

In his assessment of the country’s inflationary trajectory, Omojomolo suggested that the worst may soon be over for Nigeria, with disinflation expected to kick in by early 2025 as the ripple effects of the petrol price hikes and the naira’s devaluation gradually dissipate.

However, Omojomolo’s forecast also indicates that the CBN is unlikely to lower interest rates anytime soon, as policymakers move cautiously to avoid reigniting inflationary pressures and derail the fragile recovery in the country’s economy.

Households express cautious optimism over further rise in cost of living

Nigerian households have expressed concern over the rising costs of living in the country, and anticipate an increase in transportation, house purchase, car/vehicle, rent, and medical expenses in the next six months.

These findings were presented in the newly released Households Expectation Survey by the Central Bank of Nigeria, reflecting the growing pessimism over the economic climate in the country.

The CBN’s Consumer Confidence Index and outlook, as revealed in the Households Expectation Survey, was attributed to three key factors: Economic Conditions, Family Financial Situation, and Family Income.

The report showed that consumers, worried about rising prices, intend to limit their spending to essential items such as food, household items, education, transportation, electricity, and medical expenses.

The survey revealed that households are cautious about spending their income on large purchases, with buying condition indexes for big-ticket items like consumer durables, motor vehicles and buildings & landed properties indicating that October was seen as an unfavourable time to make such purchases.

Looking ahead to the next three and six months, consumers expressed pessimism about the buying conditions for these items, suggesting a lack of confidence in the economy and the ability to afford such expenses.

While consumers’ cautious optimism over inflationary expectations was evident in the Households Expectation Survey, a ray of hope was present, with consumers expecting prices to decrease over the next six months.

The report indicated a positive trend in consumers’ inflation perception, suggesting that households believe the general price levels of items in the economy will decrease.

This promising outlook, analysts noted, could signal a turning point for households, who have been feeling the brunt of rising prices.