• May CPI pile more misery on household 

• Millions more hit multidimensional poverty hole

ONOME AMUGE IN LAGOS, NIGERIA

Nigeria’s economy witnessed a rapid escalation in inflation rates soon after President Bola Ahmed Tinubu’s administration removed fuel subsidies and liberalised foreign exchange in 2023. This move had far-reaching implications on energy costs, leading to a domino effect of rising transportation and commodity prices.  While the initial impact of the administration’s policies sent ripples across the economy, the consequences that followed were more severe than many had anticipated. The subsequent 12 months saw a dramatic increase in the inflation index, pushing millions of Nigerians into a state of multidimensional poverty.

The National Bureau of Statistics’ (NBS) monthly Consumer Price Index (CPI) reports have become a grim reminder of the harsh reality faced by everyday Nigerians. With the prices of basic commodities soaring ever higher, the cost of living is pushing families to the brink. The supposed “renewed hope” promised by the Tinubu administration appears to have morphed into a nightmare of increasing prices and diminishing purchasing power, trapping citizens in a vicious cycle of poverty and despair.

As the inflationary spiral tightens its grip on the economy, the average Nigerian faces mounting challenges to make ends meet, watching helplessly as their hard-earned money evaporates before their eyes. 

The NBS latest CPI report for May 2024 not only revealed a persistently high inflation rate, but also reflected a disconcerting trend that has plagued Nigeria’s economy under the Tinubu administration. This is as the headline inflation rate escalated yet again from 33.69 percent in April 2024 to 33.95 percent in May 2024, while the year-on-year increase was up 11.54 percent, dwarfing the already-high 22.41 percent recorded in May 2023.

The latest CPI report showed that the average consumer price index for the twelve months ending in May 2024 had experienced a significant jump from the average of the previous twelve-month period, with a 29.06 percent change compared to the 21.20 percent recorded in May 2023. The 7.86 percent increase further indicated the persistent inflationary pressure faced by the Nigerian economy over the past year.

According to the NBS, the food inflation rate for May 2024 rose 40.66 percent year-on-year, reflecting a significant increase from the 24.82 percent recorded in May 2023. The increase was in line with the projections of economic analysts and only marginally higher than the 40.53 percent rate recorded in April 2024.

The NBS’ analysis highlighted several key factors driving the rise in food inflation in May 2024, with a variety of staple foods and ingredients leading the charge. These included semovita, oat flake, yam flour prepackage, garri, bean, etc (which are under the bread and cereals class), Irish potatoes, yam, water yam, etc (under potatoes, yam and other tubers class), palm oil, vegetable oil, etc (under oil and fat), stockfish, mudfish, crayfish, etc (under fish class), beef head, chicken-live, pork head, bush meat, etc (under meat class).

The core inflation rate, which excludes volatile agricultural and energy prices, also showed a significant rise in May 2024, reaching 27.04 percent on a year-on-year basis. The figure also represents a substantial increase of 7.21 percent from the 19.83 percent recorded in May 2023, highlighting the severity of the inflationary pressures experienced by Nigerians across various sectors. The steep increase in core inflation was largely attributed to significant price hikes in a range of essential services, including housing, passenger transportation, and healthcare.

The NBS’ report further revealed a rise in inflation rates for urban areas in May 2024, with the urban CPI category recording a year-on-year inflation rate of 36.34 percent. This represents a 12.61 percentage point increase from the 23.74 percent recorded in May 2023, highlighting the dire economic situation faced by urban dwellers across Africa’s most populous nation.

In addition to the high inflation rates experienced in urban areas, rural dwellers also faced significant price increases, with the rural CPI category recording a year-on-year inflation rate of 31.82 percent in May 2024, a notable increase of 10.63 percentage points from 21.19 percent recorded in May 2023.

On a month-on-month basis, the rural inflation rate in May 2024 was 1.94 percent, representing a slight uptick of 0.02 percentage points compared to 1.92 percent recorded in April 2024.

Indeed, as the cost of living continues to skyrocket in the face of relentless inflation, it seems increasingly unlikely that any minimum wage agreement reached by the federal government and labour unions will be enough to alleviate the economic hardship faced by the majority of Nigerians.

For many, the rising cost of necessities like food, transportation, and healthcare are pushing them to the brink of despair, with little relief in sight. Worse still, the Naira’s depreciation is another reminder that the currency cannot shield consumers from the unrelenting market forces.

The recent surge in the Consumer Price Index has prompted economic analysts to call for urgent government action. Amidst a backdrop of alarming inflationary trends, experts are urging the federal government to take decisive steps to ease the burden on consumers, who are bearing the brunt of high prices for goods and services.

Key areas identified by analysts include the need for increased foreign exchange supply to shore up the value of the naira and provide much-needed stability in currency markets; addressing the spiralling cost of petroleum products to curb rising energy costs; and improving fiscal discipline to restore confidence in the economy.

Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), expressed grave concern over the current inflationary trend. He noted that the ineffectiveness of the Presidential Task Force on Food in addressing the rising food prices is indicative of a larger economic problem.

Yusuf further stressed that any efforts to bring inflation under control would be futile if the country does not urgently address systemic issues such as power supply, logistics, forex volatility, and security challenges. He warned that without tackling these issues at their roots, the inflationary spiral will continue to wreak havoc on the Nigerian economy.

The CPPE chief highlighted the need for the government to offer incentives and support to the real sector, which comprises industries like manufacturing, agriculture, and construction.

Yusuf also suggested that the government revise its tariff policies. Specifically, he proposed that the government could offer concessionary import duty for intermediate products used by industrialists, as well as incentivise investment in the logistics sector, which could lead to lower transportation costs and improved efficiency of the supply chain.

In addition to the role of the federal government in tackling inflation, Yusuf underscored the vital role that state and local governments can play in addressing the issue of food insecurity.

Given their proximity to farmers, producers, and other key actors in the agricultural and food value chain, it is understood that sub-national governments are in a unique position to design and implement policies that support food production and distribution, thereby helping to alleviate inflationary pressures.

“They are, therefore, better placed to impact agricultural productivity. The food security situation is frightening and requires an urgent and emergency response,” Yusuf stated.

Uche Uwaleke, president of the Association of Capital Market Academics of Nigeria (ACMAN), also shared his expert perspective, identifying cost-push inflation as a significant challenge facing the Nigerian economy.

Uwaleke explained that this type of inflation, which is driven by increases in production costs rather than rising demand, has been fueled by various factors including high transport and energy costs, as well as insecurity, among other issues.

The professor of finance and capital market at the Nasarawa State University, advised the government to implement more strategies to combat food inflation and to hasten the repair of public refineries. Additionally, he recommended scaling up the number of compressed natural gas buses to ease transportation costs.

Uwaleke stated: “I have always maintained that, to deal with the rising food inflation, the fiscal authority has a lot of roles to play.

“This is because the major causative factors such as insecurity in the food-belt regions, transport and logistics challenges, as well as epileptic power supply and high cost of fuel, are all outside the control of the Central Bank of Nigeria.”