Nigeria’s annual inflation rate has surged to 24.08% in July, marking its highest level in nearly two decades and worsening the country’s cost-of-living crisis. The inflation rate was already at 22.79% in June. The surge in inflation comes as President Bola Tinubu’s reforms, which include scrapping petrol subsidies and removing foreign exchange trading restrictions, take effect. These bold reforms have led to a tripling of petrol prices and a more than 40% weakening of the Nigerian naira.
Food inflation, a major component of Nigeria’s inflation basket, also increased to 26.98% in July from 25.25% in June. This rise was attributed to increases in the prices of various food items, including oil and fat, bread and cereals, fish, potatoes, yams, fruits, meat, vegetables, milk, cheese, and eggs.
Analysts, including the World Bank, had predicted that the removal of fuel subsidies and the currency devaluation were likely to push inflation higher in the short term. The country’s acting central bank governor, Folashodun Shonubi, announced that measures impacting the currency market were being planned to address the situation.
In response to the rising inflation, the central bank raised its main lending rate by 25 basis points to 18.75% during its monetary policy meeting in July. President Tinubu, who is facing pressure due to soaring prices resulting from his reform agenda, defended his actions by stating that the reforms had already saved Nigeria over a trillion naira in just over two months.
Opinion:
The surge in inflation underscores the challenges and complexities associated with implementing significant economic reforms. While the reforms initiated by President Tinubu aim to address structural issues and improve economic efficiency in the long term, their short-term impacts on inflation and the cost of living are substantial.
The rise in food inflation, in particular, highlights the vulnerability of households to price increases, especially for essential commodities. Such high inflation rates erode purchasing power, making it more difficult for people to afford basic necessities. The government will need to implement targeted measures to support vulnerable populations during this period of economic transition.
President Tinubu’s assertion that the reforms have saved the country money underscores the trade-off between short-term pain and potential long-term gains. It will be important for the government to communicate the rationale and expected benefits of these reforms to the public while also implementing policies to mitigate the adverse effects of inflation on ordinary citizens.