In January 2024, the purchasing power of Nigerian households remained downbeat as consumer prices rose at the start of the year, increasing the likelihood that the country’s central bank would raise interest rates.
Data from the National Bureau of Statistics (NBS) showed that headline inflation for January, which tracks the prices of food, energy and other commodities, rose to 29.90%.
Food prices also rose sharply. The prices of staples like bread and yam rose as many shoppers sought more cost-effective alternatives to feed. January’s food inflation figure was 35.41%.
“The CBN has not achieved its inflation target of 6-9% since 2014, and it has even abandoned the target,” said Adedayo Bakare, an investment analyst at Money Africa.
“It has been devastating to households and businesses. The result is high and increasing poverty due to weak purchasing power, weak employment and weak growth.”
Olayemi Cardoso, Nigeria’s Central Bank governor, has repeatedly promised to tackle inflation but he has consistently been light on details. At the Nigerian Economic Summit Group (NESG) last month, Cardoso estimated headline inflation would decline to 21.4% in 2024 due to the CBN’s inflation-targeting policy.
However, the results of this policy are yet to be seen. In the past month, he has paid more attention to reforming the foreign exchange market and easing a dollar scarcity that has created a backlog of unmet demand estimated at $2.2 billion.
The CBN is expected to raise interest rates at its next Monetary Policy Committee (MPC) meeting on February 26-27, 2024, with analysts anticipating an increase of 500 basis points, to combat Nigeria’s inflation estimated at nearly a three-decade high.
This month, the CBN sold one-year bills at a yield above the benchmark interest rate, implying a possible hike at its next meeting scheduled in two weeks. Meanwhile, the Federal Government is mulling a National Commodity Board to rein in the escalating food inflation in Nigeria. A recent TechCabal report has outlined reasons why it won’t work.
