No respite in sight for Nigerians as cost of living soars

  • Experts say inflation to rise higher

Financial experts and stakeholders are pessimistic about the possibility of moderation in the rising cost of living in Nigeria. Inflation has been on the rise since February 2022 and there are no signs that it will abate anytime soon. The figure is expected to increase to 25.50 percent in August from 24.08 percent recorded in July. FESTUS OKOROMADU reports.

Uba Group

Only last week, the National Bureau of Statistics unveiled Nigeria’s inflation rate for July 2023, noting that the figure surged from the 22.79 percent recorded in June to 24.08 percent.

The latest figure represents the highest inflation rate reported in Nigeria since September 2005 (24.30%).

The new figures indicate a 1.29 percentage point increment from June and a substantial year-on-year rise of 4.44 percent, surpassing the 19.64 percent recorded in July 2022.

Available data shows that except for December 2022, when a temporary drop was recorded in inflationary pressure, ( 21.34%), inflation readings have embarked on a persistent upward trajectory, climbing by a substantial 8.48 percentage points since February 2022.

Financial experts have attributed the continuous inflationary surge to divergent factors including recent policy pronouncement by the President Bola Tinubu-led administration.

These include unification of the exchange rate, leading to the devaluation of the Naira against the Dollar in the foreign exchange market. Naira devaluation has escalated import costs.

The removal of subsidy on Premium Motor Spirit and the subsequent price adjustments also had powered an elevated energy expenses and price hike of products and services. Besides, insecurity in the Middle Belt region of the country had compelled farmers to abandon their farms and this has resulted in upward movement of food prices.

Unfortunately, while Nigerians expect inflation to have dropped and subsequently slide downward to help improve their standard of living, financial experts are of the opinion that the belt tightening programme is far from over.

“The Chamber implores the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents”

Experts’ comments

Commenting on the soaring inflation rate and the prospect of it declining soonest, Financial Experts from Cowry Securities said, “Considering the outlook for inflation in 2023, uncertainties persist with expectations of continued inflationary pressures coupled with the intricate interplay of both internal and external factors which has significantly impacted Nigeria’s inflation landscape.

“The persisting drivers suggest that inflation is poised to remain at elevated levels, presenting a substantial challenge for Nigeria’s fiscal and monetary authorities while the erosion of purchasing power for both households and businesses is a significant concern.

“Although the government and policymakers have undertaken measures to curb inflation, such as bolstering food and fuel supply and subsidizing essential commodities, the success of these efforts remains limited. The Central Bank of Nigeria has also resorted to interest rate hikes in an attempt to mitigate rising inflation; however, these measures might carry negative implications for economic growth.

“As we look ahead to August 2023, our expectations project an inflation rate of 25.50%. Factors such as the planting season, adverse weather conditions, and lingering effects of crop diseases are likely to dampen the potential benefits of the green harvest.”

The pass-through impact of foreign exchange pressures, the suspension of the Black Sea grain deal in Eastern Europe, and mounting domestic input costs are projected to sustain price pressure in the near term.

Meanwhile, the continuous vigilance of these factors, combined with targeted policy interventions, will be essential in navigating the challenges posed by elevated inflation in the coming months.

On their part, analysts at Cordros Securities said they expect the inflation rate for August to hit 25.70 percent.

Speaking on its outlook for the month, they said, “While we acknowledge the Federal Government’s implementation of the following measures in moderating food prices – (1) utilisation of funds saved by lifting the fuel subsidy to distribute fertiliser and staple foods to farmers and vulnerable households, and (2) a national flood alert and response plan for 14 affected states to avert damages ahead of the peak flooding period – we still expect food prices will remain elevated in August. Our prognosis is hinged on the continuous spillover effects of the elevated fuel prices and currency pressures on food prices in conjunction with the ongoing lean season in food-producing states. Sequentially, we expect food prices to rise by 3.36% m/m in August.”


Cordros expects the volatility in the non-food basket to remain in the coming months given these existing factors: (1) deregulation of petrol prices and (2) local currency depreciation. On (1), Oil marketers under the aegis of the Independent Petroleum Marketers Association of Nigeria, hinted that the cost of PMS would rise to the range of N680/litre and N720/litre in the coming weeks if the dollar continues to trade from N910 to N950 at the parallel market.

They also stated that dealers seeking to import PMS were being forced to put their plans on hold due to the scarcity of foreign exchange to import the product.

The experts noted that the balance of risk is tilted to further price increases.

“However, we think there is a fair chance that the government may consider temporarily halting further price increases to reduce consumer pains. Overall, we forecast the non-food inflation to rise by 2.72 percent m/m.

“All told, we see 3.10% m/m headline inflation in August, translating to a 150 bps increase in the y/y inflation rate to 25.70%,” the experts noted.

On her part, the Director General of the Lagos Chambers of Commerce and Industry, Chinyere Almona, attributed the July inflation figures to the fuel subsidy removal and devaluation of the Naira due to unification of the exchange rate.

She also agreed with the views of financial analysts that inflation will record a continuous rise in the meantime.

“The Chamber is concerned that there may be more inflationary pressures in the coming months due to the volatility of the Naira as well as the lagged effects of subsidy removal and its transmission to general prices,” she said in a statement.

Proffering solutions, she said, “LCCI recommends that the government should step up efforts to tackle food costs, especially staple food items.

“We commend the Federal Government’s declaration of a state of emergency on food security and urge them to prioritize farmers’ areas of assistance, fertilizers, and seeds to mitigate the effects of subsidy removal as well as strengthen strategic food reserves to be used as price stabilization mechanisms.

“The Chamber implores the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents.”

Similarly, the Institute of Chartered Secretaries and Administrators of Nigeria, has said that there is a need to devise other means beyond raising the Monetary Policy Rate by the CBN to curb inflation.

Addressing the media last week, the President/Chairman of Council, ICSAN, Mrs. Funmi Ekundayo, noted that the CBN has increased MPR about four times by a total of about 225 basis points this year with little or no impact on inflation.

“I think this year alone the CBN has increased MPR about four times by a total of about 225 basis points. That is huge. But what do we see? Has it had any impact on inflation? I will say no.

“So I think that it is very important for CBN to look beyond this orthodox method because it doesn’t look like it is working for us. I believe that the government should look beyond the management of interest rates to curb inflation.

“There are so many areas the government can look into to make the economy more efficient.

“There is a need to increase real investment in infrastructure for instance. And I think for CBN as well, economic policies should be made taking cognizance of our own peculiarities and what would work for us.

“The government should also try to reduce leakages in the system because at the end of the day, when you look at the cost of governance all of these have a direct impact on growth and the ability of the government to invest,” she stated.

Meanwhile, the CEO of Maxifund Securities Limited, Mazi Okechukwu Unegbu, is of the opinion that the inflation figure of 24.08 percent reported by NBS is inaccurate.

“The 24.08% is the figure produced by an agency of the government. That figure is not even correct. For those of us, private economist who keep track on inflation, even using the NBS’s data from 1980, by my own calculation the inflation today is 28.5%.”

He noted that with such a high inflation rate as well as a high lending rate by commercial banks, an increasing exchange rate and debt to GDP ratio on the rise, the possibility of inflation rate declining is a mirage.

“Now all the economic indicators are on the upward swing against the Nigerian economy.

“The only way we can come out of the viral inflation is for the government to create a conducive environment for production and export of goods and services to earn foreign currency,” he stated.

Unegbu urged the government to encourage local production of goods that meet global standards instead of exporting raw materials, arguing that it will lead to creation of industries and employment opportunities which in turn will bring about increased expenditure and savings, reduce tax rate so as to expand tax net among others.

He warned that without an aggressive, well thought out home grown economic policy that will increase the nation’s foreign currency income coupled with the insecurities depriving farmers from cultivating their farms, inflation will continue to rise.

Following the same line of argument, the National President of All Farmers Association of Nigeria, Kabir Ibrahim said the reality on ground is far from the inflation rate reported by the NBS in July.

“I’m sure NBS is trying to moderate the figures, but I won’t blame them because they have their own parameters, but as a layman, what I am seeing is much more than their figures,” he told our reporter in a telephone chat.

He insisted that many ordinary Nigerians can no longer afford food due to the high cost of food items.

“I know the number of requests I’m getting even from people I thought should be better off. Things are really tough,” Ibrahim said.

He stated that while the government has announced the provision of funds for palliatives as well as the release of fertilizers to farmers the common man on the street is yet to feel the impact.

“While the government is announcing measures to bring down the price of food which is actually the key driver of the inflation, the common man or ordinary Nigerians are not feeling the effect of the palliatives now.

“Unfortunately, we cannot get the result of the initiatives this year because the fertilizer they say they are giving to farmers, cannot produce any result until the harvest season, that means it is going to get worse, it is only from next year that we will feel the positive effect, but that is if we are able to get it right.

“These people said they are experts in financial matters, but we have not seen it, even though we were saying that Buhari was under some sort of spell, what we are seeing today is even worse than Buhari’s time,” he lamented.

Sharing a personal experience, Chinedu Obiora, a trader in Wuse market Abuja said the inflation figures released by the NBS belongs to the government and does not reflect the true picture of things.

“The cost of feeding in my home has more than tripled between June and July and NBS is saying something otherwise. Those figures are generated to suit their (government) interest. We know the reality on ground.

“Our businesses are slowing down as people are barely managing to feed themselves. The price of goods has skyrocketed and people say they don’t have money to purchase as the cost of transportation is high. Patronage is low as many families can no longer afford the things they used to buy,” he grieved.

Asked if he thought inflation will soon reduce, he said, “I am not sure because the government has refused to do the needful.”

Economists warn against Naira redenomination policy

Some economists and finance experts have also cautioned the Central Bank of Nigeria against revisiting the Naira redenomination policy while asking the Federal Government to jettison the idea.

“Our businesses are slowing down as people are barely managing to feed themselves. The price of goods has skyrocketed and people say they don’t have money to purchase as the cost of transportation is high. Patronage is low as many families can no longer afford the things they used to buy”

Implementing the decision, according to the experts, is like hitting the last nail into a coffin. Advising against the plan, a financial economist and a Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke said it will be an ill-timed decision, considering that the CBN initiated a currency redesign last year which is still subsisting.

He added that currency redenomination exercise is no longer a popular option in many economies.

Uwaleke said, “Another currency reform by way of redenominating the Naira will be ill-timed considering that the CBN is still implementing the currency redesign started last year. The only benefit of currency redenomination as the experience of Ghana has shown is the positive psychological effect that comes with currency illusion.

“Beyond that, it’s akin to painting the exterior of a building while the interior is filthy and uninhabitable. It doesn’t in itself address the problem of rising inflation or the depreciation of the domestic currency.”

Rather than embark on such a monumental project at this time with implications for accounting and record keeping, especially on the part of businesses, the professor of capital market advised that efforts should be geared towards addressing the root causes of declining purchasing power of the Naira.

Another expert in the finance sector, Gabriel Idakolo, said Naira re-denomination is certainly not an effective way to revamp national currency.

He recalled the Ghana experience that led to the country’s currency being the worst performing currency in Africa at the time. Idakolo said, “Naira redenomination is certainly not an effective tool to save the Naira presently due to our weak economy, high inflation and very high unemployment and multi-dimensional poverty. Ghana re-denominated their currency (Cedi) some years ago and it was credited that Ghana’s currency is the worst performing currency in 2022 in sub-Saharan Africa.

“This was as a result of the present problems I mentioned plaguing Nigeria. The major policies that can stem the free fall of the Naira is injection of fresh foreign exchange into the economy, aggressive increase in government revenues, serious and effective policy implementation aimed at improving our ease of doing business and determined intervention by government is key areas of our economy like manufacturing, power, SMEs and services sector. The policy initiatives by the Bola Tinubu government in tackling the economy can strengthen the Naira if properly implemented.”