It is no longer in doubt that Nigeria is experiencing an extremely high rate of inflation. Even those who aren’t familiar with economic terms can tell you that consumer goods prices have more than doubled in 2022. The Nigerian Bureau of Statistics (NBS) places Nigeria’s inflation rate at 21.5% as of November 2022.
Nigeria Inflation: when will the rise end?
This according to the World Bank’s latest Nigeria Development Update, is currently at a 17-year high and one of the highest globally. Inflation in Nigeria has been steadily rising since 2019 and has been largely driven by multiple exchange rates and exchange rate depreciation in the parallel market, increased trade restrictions and the CBN buying bonds issued by the government. This has been further worsened by the hike in global food and energy prices caused by the war in Ukraine.
Traditionally, Nigeria’s economy has been supported by oil booms but in 2022 this has not been the case. In spite of increased global oil prices, Nigeria’s production levels have dropped. As a matter of fact, Nigeria exists as an oil importing country instead of an oil producing country, adding the pressure of petrol subsidy removal into the mix.
Economic experts including the IMF and World Bank have argued that if Nigeria is to stand any chance in reducing its inflation rate then a combination of trade, monetary and fiscal policies must be used.
The CBN’s current weekly cash withdrawal limit is one of the measures targeted at reducing inflation. So what does this mean to the trader in the local market or the farmer in the village? Phasing out of the petrol subsidy combined with reduced money in circulation will negatively affect consumers as there will be higher pump prices and the pass-through effect on transportation costs.
Unless the Nigerian government intensifies plans for social protection for its citizens, the estimated 63 million Nigerians experiencing multi-dimensional poverty will definitely increase rapidly. Strap in your seatbelts Nigerians, there are rough roads ahead.