The first time in over two years that Nigeria’s headline inflation has decreased is because of lower food prices, which are mostly the result of the harvest and base effect.
As per the National Bureau of Statistics (NBS), there was a decrease in the Consumer Price Index from 34.19 percent in June 2024 to 33.40 percent in July 2024. Monthly headline inflation also decreased, from 2.31 percent in June 2024 to 2.28 percent in July 2024.
Based on the high base effect from the previous year, the impact of the federal government’s 150-day import tariff holiday on food inflation, and the recent stability of the Naira, analysts had earlier predicted that Nigeria’s high headline inflation would decline in July.
According to FBNQuest Merchant Bank macroeconomic and fixed income analyst Tobi Ehinmosan, the reduction in inflationary pressure suggests a slowdown in price growth.
“Compared to previous months, the prices of food items in the market have decreased,” he said, adding that because prices had surged so high, the typical Nigerian might not really notice this right away.
A major contributor to overall inflation, food inflation decreased from 40.87 percent in June to 39.53 percent in July.
Additionally, CardinalStone analysts noted that declining food costs contributed to a moderating of Nigeria’s headline inflation.
“The July CPI statistics showed that headline inflation had slowed to 33.40 percent, which was lower than our expectation of 33.70 percent. The outcome was biassed towards the food basket, which fell 134 basis points to 39.53 percent year on year, while the core basket increased marginally by 6 basis points to 24.47 percent,” they stated.
The News Chronicles study of food costs on the market prior to the NBS’s announcement of inflation numbers showed that tomato prices had decreased. From an average of N120,000 in May/June 2024 to N50,000 in August, the price of a basket of tomatoes decreased. The price of a small basket of pepper dropped from N35,000 in May/June to N13,000.
Garri “plastic paint” went from N4,000 to N3,500 in price during that time, while Irish potato “plastic paint” went from N12,000 to N4,000.
Households are experiencing relief as the costs of tomatoes, pepper, Irish potatoes, yams, and garri are currently dropping in various marketplaces throughout the nation.
Though the recent slowdown in headline inflation gives some comfort, Commercio Partners analysts noted that the situation is still complicated and full of dangers.
“The upcoming minimum wage change, for example, could exacerbate inflationary pressures if not adequately controlled. Furthermore, the rise in core inflation suggests that underlying inflationary pressures have persisted.”
Core inflation, which does not include energy and volatile agricultural goods, increased from 27.40 percent in June 2024 to 27.47 percent in July. The core inflation rate increased by 0.10 percent month over month, from 2.06 percent in June 2024 to 2.16 percent in July 2024.
Many analysts believe that the CBN should stick with its current course of interest rate hikes since they have been successful in reducing inflation.
In an effort to combat persistently high inflation, this year’s Monetary Policy Committee (MPC) increased interest rates by 750 basis points to 26.75 percent.
“We expect the CBN to retain its present monetary policy stance at its next meeting, given that the recent rate hikes have already tightened monetary conditions significantly. However, if inflationary pressures continue, future rate hikes cannot be ruled out,” according to Commercio Partners analysts.
According to Ehinmosan, who was previously quoted, the improved inflation signals a positive policy choice by the MPC, which may lead it to pause its rate-hike cycle.
“Business owners may breathe a sigh of relief knowing that borrowing costs will not rise further. However, it is early to predict whether the MPC would decrease interest rates when it meets next month,” he said.
Prices have continued to rise in Northern Nigeria, particularly for grain, as insecurity drives farmers off their land.
The NBS stated that Benue (27.28%), Delta (28.06%), and Borno (28.33%) had the slowest rise in headline inflation year over year, while Bauchi (46.04%), Jigawa (40.77%), and Kebbi (37.47%) had the highest year over year inflation rates for all items.
“Month-to-month inflation increases, however, were greatest in July 2024 in Abuja (3.91%), Borno (3.84%), and Enugu (3.76%); the lowest increases were recorded in Taraba (0.17%), Kwara (0.62%), and Ondo (0.91%).”
According to a study by SB Morgen, the problem of insecurity has mainly shown itself at dinner tables and forced people in the North onto the streets, aggravating Nigeria’s precarious security situation.
According to the research, “while hunger and economic hardships impact the entire country, they are significantly more severe in the North.”
