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Nigerians Wrestle with Soaring Food Prices as Inflation Surges to 24.08%

August 16, 2023

Photo Credit: Vanguard

 

Nigeria has witnessed a staggering annual inflation rate spike to 24.08% in July, marking the highest level in nearly two decades. The surge is largely attributed to soaring food prices and elevated transportation fares, revealing the growing challenges faced by households to sustain their daily nutritional needs. The situation has been further exacerbated by the removal of fuel subsidies and the ongoing depreciation of the national currency.

This significant rise, which indicates a 1.29-percentage-point increase from June’s 22.79%, is predominantly driven by the escalating costs of essential food items, including fats, oils, bread, cereals, fish, potatoes, yams, fruits, meat, vegetables, milk, cheese, and eggs.

As a result, food inflation has surged to an alarming 26.98%, marking the highest rate observed in 18 years since September 2005.

Additionally, reflecting the repercussions of the fuel subsidy removal on transportation expenses and associated services, core inflation (which excludes farm produce and energy) has risen to 20.47% in July, reaching its highest level in 19 years and surging by 0.41 percentage points compared to June’s 20.06%.

In its Consumer Price Index report for August, the National Bureau of Statistics unveiled that elevated prices of food and non-alcoholic beverages were the primary contributors (12.47%) to the overall rise in July’s headline inflation rate to 24.08%. This was followed by increments in housing costs, water, electricity, gas, fuel (4.03%); clothing and footwear (1.84%); transportation (1.57%); and household equipment and maintenance (1.21%).

The NBS disclosed, “In July 2023, the headline inflation rate rose to 24.08% relative to June 2023’s headline inflation rate of 22.79%.” The year-on-year basis comparison revealed a significant 4.44% increase from July 2022’s rate of 19.64%.

Furthermore, the report indicated that individuals continue to face the repercussions of these developments. Notably, the average Consumer Price Index (CPI) change over a twelve-month period ending July 2023 was 21.92%, signifying a 5.17% growth compared to the 16.75% recorded in July 2022.

Impact on Food Inflation: The food inflation rate in July 2023 soared to 26.98% on a year-on-year basis, marking a substantial 4.97% increase compared to July 2022’s rate of 22.02%. On a month-on-month basis, the food inflation rate escalated to 3.45%, 1.06% higher than June 2023’s rate of 2.40%.

The average annual food inflation rate for the twelve-month period ending July 2023 was 24.46%, representing a 5.71% surge from July 2022’s average annual rate of change at 18.75%.

Core Inflation Trends: The core inflation rate, which excludes volatile agricultural produce and energy prices, reached 20.47% in July 2023 on a year-on-year basis, displaying a notable 4.41% increase compared to July 2022’s rate of 16.06%.

The highest price hikes were observed in areas such as air passenger transport, road passenger transport, vehicle spare parts, medical services, and the maintenance and repair of personal transport equipment.

On a month-on-month basis, core inflation reached 2.11% in July 2023, up by 0.34 percentage points from June 2023’s 1.77%. The average twelve-month annual inflation rate for the twelve months ending July 2023 was 18.84%, which marked a 4.31% points increase from July 2022’s rate of 14.53%.

Impact and Projections: Industry experts, including Dr. Muda Yusuf, CEO of the Center for Promotion of Private Enterprise (CPPE), emphasized that while the removal of fuel subsidies and naira depreciation primarily fueled the inflation rate surge, the consequences were dire for both citizens and small businesses. The overall effects include weakened purchasing power, elevated production costs, diminished shareholder value, reduced investor

confidence, and a decline in manufacturing capacity due to lower sales and profit margins.

Analysts at Lagos-based investment banking firm Comercio Partners projected that the inflation rate would continue to rise due to ongoing insecurity affecting food prices. They also cited factors such as high transportation costs, imported food costs, and ongoing currency depreciation as contributing to the inflationary pressures.

As Nigeria navigates these challenges, individuals and businesses alike are grappling with the impacts of skyrocketing inflation, raising concerns about economic stability and the well-being of the population.

Source: Vanguard

 

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