Economists predict that Nigeria’s inflation will continue if the exchange rate is not stabilized.
According to the national statistics bureau, the inflation rate in Nigeria has reached 26.72%, the highest it has been in 20 years. This has caused significant economic struggles for millions of people in Africa’s largest country, which analysts believe are worsened by government policies aimed at reform.
The inflation rate in Nigeria increased for the ninth month in a row, reaching 25.8% in September, following a previous high of 25.8% in August.
The inflation rate for the current year was 5.94% higher than the rate in September of 2022, which was 20.77%.
According to the National Bureau of Statistics, the rise in prices of food items such as bread, cereals, meat, vegetables, milk, cheese, tubers, fish, fruit, oil, and fat contributed to this trend.
According to economic experts, the recent rise in prices can be attributed to government actions such as the removal of fuel subsidies in May. They believe this trend may persist in the future.
The policies were not managed effectively. When implementing changes, there is a specific order in which they should be carried out,” stated Ogho Okiti, the CEO of ThinkBusiness Africa. “Currently, it seems they are learning as they go. Based on current trends, it is possible that we will see a 28-29% increase. This is due to the fact that until the exchange rate stabilizes, inflation in Nigeria will not stabilize. The value of the naira has decreased by more than 100% in just four months, from June until now.”
Nigerian President Bola Tinubu embarked on bold policy reforms since entering office in May, scrapping the expensive fuel subsidy payments — a package that ensured fuel was kept within affordable limits at pumps.
Soon after, the president introduced a national tender, the naira, in comparison to other international currencies, leading to a decrease in its value by over 50%.
The changes negatively impacted the economy, leading to criticism of the government.
This month, after a meeting with authorities, a Nigerian workers union decided not to go through with their plans for a nationwide strike in protest of government policies.
Okiti stated that the government policymakers and consumers will both face increasing pressures.
Okiti expressed concern about the three types of pressures (social, political, and economic) that the government faces. He hopes that these pressures do not escalate into a major crisis, as there is a belief that Nigerians will simply tolerate these challenges, which may not necessarily be true.
According to economic analyst Emeka Okengwu, Nigeria’s economy could have been in a worse state if it weren’t for the president’s policy reforms.
Okengwu posed the question, “What would have happened to the economy if the fuel subsidy was not removed and all of the total revenue was being spent on supporting social services?” He emphasized that the economy would have collapsed, leading to discussions about “perflation” instead of inflation. He acknowledged that economic development can be challenging and sometimes requires paying difficult prices.
Since 2016, Nigeria has consistently experienced inflation in the double digits. In a televised address on October 1st, President Tinubu defended his policies and encouraged Nigerians to practice patience.
The Central Bank recently removed a restriction on obtaining foreign currency from official sources to import 43 goods, such as rice, cement, palm oil products, vegetable oils, and processed meat.