Nigeria’s Consumers Price Index, commonly known as inflation rate, has continued to soar against all expectations from the Central Bank of Nigeria’s Monetary Policy Committee. FESTUS OKOROMADU reports on factors fueling the hike and the predictions of financial experts on the nation’s inflation rate in the coming months.
The latest Consumer Price Index report released by the National Bureau of Statistics shows that Nigeria’s inflation rate rose for the second consecutive month in October 2024, reaching a four-month high of 33.88 percent, up from 32.70 percent in September. The figure translates to a 1.18 percent point above September’s numbers and higher than analysts’ expectations.
As suggested in some quarters the significant hike of 1.18 percent in October inflation indicates that inflation is becoming intractable and is unlikely to reach an inflection point anytime soon.
A decomposition of the inflation basket shows that the weak naira, petrol price, logistics costs, are major contributory factors that gave inflation some momentum.
Both the food and non-food baskets recorded price increases. Food inflation, which remains the usual suspect, spiked by 1.39 percent to 39.16 percent. In spite of the harvest, the weak naira, logistics costs (which was heightened by petrol price), had its toll on commodity prices.
Highlighting the reasons for the hike in food price during the month of October, financial experts at Cordros Securities in their latest weekly publication noted that despite the typical boost from October harvest season, food inflation surged by 300 basis points to 2.94 percent month-on-month as against 2.64 percent in September.
“This trend reflects persistent structural challenges undermining the agricultural sector’s productivity,” they stated.
They identified the key factors responsible for this trend to include widespread flooding disrupting farming activities, ongoing conflicts in the Northern region limiting agricultural operations, and rising input cost constraining harvest yields below historical averages, all of which have kept agricultural food prices elevated.
“Additionally, the persistent currency depreciation maintained upward pressure on imported food prices, while increased transportation cost – a direct consequence of higher Premium Motor Spirit (PMS) prices – inflated retail food prices across the board.”
“Infrastructure improvements, better agricultural productivity, and currency stabilisation will be crucial in achieving long-term price stability”
On their part, financial analysts from Cowry Assets Management Limited insisted that, “the upward trajectory of the headline index reflects price pressures across all components of the index despite government and monetary policy interventions, such as the Central Bank of Nigeria’s rate hikes and the zero-duty import policy. This aligns with CBN’s recent inflation expectation survey, which highlights households’ and businesses’ belief that inflation will continue to rise in the next three to six months.”
Meanwhile, a detailed analysis of the inflation report from NBS shows that on a month-on-month basis, headline inflation in October rose by 2.64 percent, 0.12 percentage points higher than the 2.52 percent recorded in September, indicating a faster increase in average price levels compared to the previous month.
As usual, food inflation, which constitutes the largest component of the inflation basket, climbed to 39.2 percent from 37.8 percent in September. Although this increase coming during agricultural product harvest across Nigeria is a source of concern to experts, they argue that the situation was exacerbated by reduced harvests due to severe flooding and ongoing security crises in key agricultural regions.
Unfortunately, no aspect of the nation’s mean economy was spared from the inflationary trend as transport inflation rose to 29.3 percent, driven by higher petrol and gas prices following the removal of subsidies. Housing and utilities inflation also edged up to 28.8 percent from 28.6 percent, influenced by increased electricity tariffs.
On a monthly basis, food inflation stood at 2.94 percent, up by 0.30 percentage points from September’s 2.64 percent, primarily driven by price increases in categories such as oil and fats (palm oil, vegetable oil), fish (mudfish, croaker, fresh fish), meat (dried beef, goat meat, mutton), and bread and cereals (plantain flour, rice).
Core inflation, which excludes volatile food and energy prices, hit an all-time high of 28.4 percent, compared to 27.4 percent in September.
On a monthly basis, core inflation increased by 2.14 percent, slightly above September’s 2.10 percent while the average twelve-month annual inflation rate stood at 26.12 percent, a significant 6.14 percentage points higher than the 19.98 percent recorded in October 2023.
According to the NBS, on a state-level basis, year-on-year all-items inflation was highest in Bauchi at 46.68 percent, Kebbi 40.02 percent, and Sokoto 39.65 percent, while Delta which recorded 27.85 percent, Benue 28.22 percent, and Katsina 29.59 percent had the lowest inflation rates. Month-on-month, Kano recorded the highest increase of 3.77 percent, followed by Bauchi 3.74 percent, and Adamawa 3.59 percent, while Kwara with 1.27 percent, Ondo 1.49 percent, and Lagos 1.91 percent recorded the slowest.
For food inflation, year-on-year rates were highest in Sokoto with 52.18 percent increase, followed by Edo 46.55 percent, and Borno 45.85 percent, while Kwara with a record 31.68 percent, Kogi 33.30 percent, and Rivers 33.87 percent saw the slowest rises. Month-on-month food inflation was most pronounced in Adamawa posting 5.08 percent, Sokoto 4.86 percent, and Yobe 4.34 percent growth rate, while Kwara recorded the lowest at 1.11 percent, followed by Ondo 1.31 percent, and Kogi 1.50 percent.
Overall, while it may be said that the continued hike in Nigeria’s inflation rate reflects rising food prices, surging energy costs, supply chain disruptions in agriculture, and ongoing foreign exchange volatility, the fact that inflationary pressures remain persistent despite the CBN’s interest rate hikes and the government’s zero-duty import policy, is a course for concern.
Experts’ comments
The Chief Executive Officer of Financial Derivatives Company Limited, Bismark Rewane, expressed worries over the continued rise in the nation’s inflation. He noted that despite efforts of the Monetary Policy Committee of CBN to curb inflation using the instrumentality of interest rate hike, fiscal policy factors continue to put pressure on the system to the extent that the expected results are not achieved.
He is of the opinion that the MPC meeting scheduled for November 25 and 26 will further increase interest rates again.
“Nigeria’s inflation continues to rise despite the CBN’s effort to increase interest rates and impose money supply constraints. This implies that inflation is driven by output constraints rather than money supply saturation. Hence, October’s data sets the stage for a pivotal policy response. More likely than not, CBN is expected to increase interest rates again,” he stated.
However, the CEO of Cowry Assets Management Limited, Johnson Chukwu, is of the view that to address Nigeria’s inflation crisis requires not only monetary adjustments but also significant structural reforms to resolve persistent bottlenecks.
“Infrastructure improvements, better agricultural productivity, and currency stabilisation will be crucial in achieving long-term price stability,” he stated.
According to him, inflation globally remains a critical concern for policymakers, prompting stringent measures to contain price surges while balancing growth considerations.
“In Nigeria, despite the CBN’s tight monetary stance, structural challenges—including inadequate infrastructure, high energy costs, and logistical inefficiencies — continue to hinder the efficacy of anti-inflationary policies.”
Meanwhile, the Cowry Research team in their latest weekly report say they anticipate that inflation will climb further in November to 34.45 percent, reflecting sustained pressures from the same factors as well as price pressures from seasonal effects across the country.
“The Monetary Policy Committee (MPC) is scheduled to meet in two weeks. At its last meeting in September 2024, the MPC raised the Monetary Policy Rate (MPR) by 50 basis points to 27.25%, increased the Cash Reserve Ratio (CRR) for deposit money banks to 50%, and maintained the CRR for merchant banks at 16%. Given the persistent inflationary pressures, we expect the MPC to tighten further with a potential 25 to 50 basis points increase in the MPR,” they stated.
Researchers at Coronation Securities Limited, equally expressed pessimism over the situation predicting that inflation would continue to soar in the near future. Commenting on the NBS inflation report for October, they stated, “Typically, the main harvest period spans September through December across both the Northern and Southern regions. However, a recent report from the Farming Early Warning System Network (FEWSNET) suggests an impending deterioration in food security from November 2024 through May 2025, driven primarily by suboptimal harvest yields.
“This, combined with persistent naira volatility and festive-driven consumer demand, is expected to sustain price pressures on both locally produced and imported food items. As a result, we expect food inflation to print 3.04% m/m in November, leading to a further increase in the year-on-year numbers (+160bps to 40.83%).”
Similarly, analysts at Cordros Securities say, “Over the rest of the year, we expect the headline inflation to be influenced by the existing challenges and the increased demand that accompanies the festive season. Consequently, we project the headline inflation to rise by 2.65% m/m in November, translating to a y/y reading of 34.60%.”
“The government’s ability to manage its debt will be crucial in determining the space available for growth-enhancing spending. Excessive borrowing without a clear repayment plan could further exacerbate the nation’s debt burden”
Widespread doubts over 2025 budget projections and sustainability
The Federal Government’s ambitious N47.9 trillion budget proposal for 2025 has sparked widespread debate among economic experts, with concerns over its projections and sustainability.
While the government has touted the budget as a tool to tackle economic hardship and reflate growth, analysts argued that key assumptions such as the exchange rate of N1, 400 to the dollar, an oil output of 2.06 million barrels per day (mbpd), and oil pricing were unrealistic.
Chief Executive Officer of CFG Advisory, Tilewa Adebajo in an interview on a live television programme on Friday highlighted the disconnect between the projections and Nigeria’s fiscal reality.
He questioned the feasibility of further expansion; given the fiscal deficit’s rise from N13 trillion in 2023 to a projected N18 trillion in 2024.
On the exchange rate benchmark, Adebajo warned that N1, 400 to the dollar was overly optimistic, saying inflationary pressure and deficit financing could push rates to N1, 800 or beyond.
He said, “The real issue is whether we can afford what we’re budgeting for. Revenues for 2024 were projected at N17 trillion, but we consistently implemented only half the budget due to shortfalls. If you cannot fund your plans, you carry deficits forward, a cycle we’ve seen repeatedly. The budget’s effectiveness depends on realistic revenue projections.
“For example, the Finance Minister mentioned raising $2.2 billion in external debt financing, $1.7 billion from Eurobonds, and $500 million from the Sukuh programme. Yet, domestic debt has ballooned from N50 trillion to N70 trillion in just one year.
“Combined with external debt nearing $45 billion, debt sustainability is a concern. Despite recent reforms, like fuel subsidy removal and foreign exchange liberalisation, the revenue increases expected from these measures haven’t materialised. The economy is still in stagflation. We need to address the issue of fuel pricing.
“While development commissions serve critical needs, you cannot sustainably budget for initiatives you cannot finance. If you continue to do that, you are going to continue carrying deficits. The government must demonstrate the impact of these allocations. For example, oil production was targeted at 1.8 million barrels per day, yet this is not reflected in foreign reserves or the Federation Account. Transparency is lacking.”
To ease debt pressures, Adebajo proposed selling joint venture oil assets to raise $50 billion.
He said, “If the government pursued balance sheet restructuring, such as selling JV oil assets, it could raise $50 billion to reduce debt and boost efficiency.”
Key components of the budget, including an oil price target of $75 per barrel and production pegged at 2.06mbpd, face similar skepticism.
Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, argued that GDP growth projections of 4.6 per cent appeared optimistic, given recent performance and current policies.
“To assess the potential of the budget is to look at the assumptions of the budget. The first one has to be the price of all our $75 that they are projecting and based on what’s happening now, it seems as if it is realistic, but the truth of the matter is that a lot of things that will happen in the world market depends on the stance of Donald Trump when he gets to power in January.
“If he really goes tough on the Middle East, all prices might soar higher. Although he has mentioned that his plan is to reduce oil prices as part of the measures to reduce inflation in America. So, if it goes about that he might actually even increase more supply into the market, and the oil prices will crash. Based on that, $75 may be too high.
“In terms of crude oil production, they are projecting two million barrels per day. We can say this two million is realistic if they ramp it off. However, the main question is the 1.8 million barrel they claim, how verifiable is it? Because now, over the last couple of months, we’ve seen the NNPC working back on some of their statements.
“Then, for the exchange rate of N1,400, I think that one is a very tough call, because it’s hitting about N2,000 to $1, and from the way things are going, we’ve not been able to see any indication that it is going to improve in the near term. So this may actually be a bit ambitious.
“For the 4.6 percent GDP growth rate, we struggled to reach 2.3 percent in the last quarter. And also remember that the CBN is pursuing a contractionary monetary policy. So, if I look at that, it might be difficult for us to achieve this 4.6 percent.”
On her part, Head of Research at Parthian Partners, Olufunmilola Adebowale, noted that although the budget represents a 74.18 per cent nominal increase, its real value has declined by 23.22 per cent in dollar terms due to inflation and currency depreciation.
She said, “The government aims to generate over N30 trillion in revenue, underpinned by an oil price target of $75 per barrel and a production target of 2.06 million barrels per day (mbpd). While the oil price target is reasonable, the production target of 2.06mbpd appears overly optimistic.
“OPEC reported Nigeria’s oil production reached just 1.4mbpd in October, well below the target. Although production is expected to rise due to efforts to combat theft and pipeline vandalism, achieving the 2mbpd target in the short term seems unlikely.
“The government’s ability to manage its debt will be crucial in determining the space available for growth-enhancing spending. Excessive borrowing without a clear repayment plan could further exacerbate the nation’s debt burden.”
On inflation and exchange rates, she noted that rising inflation and currency depreciation could erode the purchasing power of the budget, undermining its effectiveness, particularly for essential imports and capital expenditure.
Furthermore, on inclusive growth, she said, “Ensuring that the budget prioritises job creation, poverty reduction, and social welfare programmes will be key to making growth sustainable and inclusive, benefiting a wider portion of the population.”
The Lead Director of Centre for Social Justice, Eze Onyekpere in his reaction to the announcement of the approval of the medium-term expenditure framework (MTEF) 2025-2027 by the Federal Executive Council, said though it is too early to comment as the details are not yet made public, the N47.9 is approximately N48 trillion which is equivalent to $28.2 billion at an exchange rate of N1, 700/$.
“Nothing to cheer about,” he said. “Check the budget of peers like South Africa and Egypt and you will know we are joking in the name of budgeting. No hope in the renewed hope after putting Nigerians through unprecedented misery.”
Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, who briefed journalists after the FEC meeting presided over by President Bola Tinubu on Thursday, did not provide details, but simply said the council approved the medium-term expenditure framework (MTEF) for 2025-2027.
He also said the government pegged the crude oil benchmark at $75 per barrel and oil production at 2.06 million barrels per day (bpd)
The budget minister said the exchange rate was pegged at N1, 400 per dollar, noting that the government is targeting a gross domestic product (GDP) growth rate of 6.4 percent.
Nigerians had expressed worry over the delay in the submission of the MTEF 2025-2027 to the National Assembly few weeks to the end of the year, a situation they fear may also delay the presentation of the 2025 budget to the National Assembly and affect the quality of debate on the budget.
The Fiscal Responsibility Act mandates the Minister of Budget and Economic Planning to, before the end of the second quarter of each financial year, present the Medium-Term Expenditure Framework to the Federal Executive Council for consideration and endorsement.
Thereafter, the MTEF as endorsed by the FEC shall take effect upon approval by a resolution of each House of the National Assembly.
If that provision was observed, the MTEF 2025-2027 should have been endorsed by the Federal Executive Council by the end of June 2024 and should have been presented to the National Assembly in August 2024.
A Professor of Accounting and Financial Development, Lead City University, Ibadan, Professor Godwin Oyedokun, said the late approval of the MTEF for 2025-2027 by the Federal Executive Council is a cause for concern for several reasons because, according to him, it compromised the budgetary process.
“The late approval significantly undermines the quality of the budgetary process. It limits the time available for thorough scrutiny, analysis, and public input,” he said.
He said the lawmakers may be forced to rush through the budget approval process, increasing the risk of errors and omissions.
However, he said it is important not to sacrifice quality scrutiny on the altar of meeting deadlines.
According to him, “Even if the budget proposal came late, lawmakers should conduct a thorough review of the budget proposal, paying close attention to revenue projections, expenditure allocations, and debt sustainability.
“They should engage with civil society organizations, experts, and the public to gather feedback and ensure that the budget aligns with the needs of the people. And of course they should ensure that the budget adequately funds critical sectors such as education, healthcare, and infrastructure.”
