Why Nigeria’s Declining Inflation Rate Fails to Reflect Market Realities – Report

Nigeria’s most recent inflation report, which showed a decline in July 2024, has sparked mixed reactions. Many Nigerians feel that the reported figures do not accurately reflect the current market realities.

On Thursday last week, the National Bureau of Statistics (NBS) released its Consumer Price Index and Inflation data for July. The report indicated that headline inflation dropped to 33.40% from 34.14% in June, while food inflation decreased to 39.53% from 40.87%. Core inflation also fell to 34.19% from 34.98%, and month-on-month food inflation declined to 2.47% from 2.55%.

This decline is notable as it marks the first reduction in Nigeria’s inflation rate since December 2022, when it stood at 21.34%. The drop comes in the wake of various monetary and fiscal interventions by the government.

The Central Bank of Nigeria recently raised the interest rate to 26.75% to combat inflation. Additionally, the government has introduced a zero import duty waiver on staple foods like rice, sorghum, millet, maize, wheat, and beans to address rising food prices.

However, market surveys paint a different picture. According to NIGERIA NEWS 247, prices for staple foods remain high: a 50-kilogram bag of local rice ranges from N78,000 to N85,000, beans from N2,800 to N3,400 per mudu, and garri between N1,300 and N1,600. Other items, such as a basket of tomatoes and peppers, cost between N6,000 and N9,000, while 1kg of frozen chicken is around N4,500. A trader in Dutse Market, Mrs. Caroline Usman, noted that, apart from yam prices which have decreased due to harvest season, other food items continue to experience price increases.

Financial experts have weighed in on the apparent disconnect between the NBS inflation data and actual market conditions. In interviews with NIGERIA NEWS 247, they offered several explanations.

Muda Yusuf, Executive Director of the Centre for the Promotion of Private Enterprise, explained that a decrease in inflation does not equate to a reduction in prices. Instead, it reflects a slower rate of price increase. He emphasized that addressing inflation requires tackling issues such as foreign exchange instability, high energy costs, and insecurity. Yusuf also highlighted the importance of reducing import dependency on fuel and refining domestically to help control costs.

Gbolade Idakolo, CEO of SD & D Capital Management, observed that while the decline in inflation figures might be influenced by government policies, the economic environment remains challenging. He noted that high interest rates from banks are hurting businesses and that recent fiscal measures, including the import duty waiver, may take time to impact food prices. Idakolo stressed the need for policies that directly address the cost of living and make government measures more bearable for ordinary Nigerians.

Prof. Godwin Oyedokun from Lead City University in Ibadan pointed out that the gap between NBS data and consumer experiences highlights the complexity of interpreting economic indicators. He suggested that improving data collection, implementing targeted interventions, and stabilizing the exchange rate are crucial steps to address inflation effectively. Oyedokun also recommended structural reforms to enhance the business environment and productivity.

Okechukwu Unegbu, former president of the Chartered Institute of Bankers of Nigeria, criticized the NBS data, asserting that core and food inflation are actually higher than reported. He argued that the real inflation figures are around 36% for core inflation and over 40% for food inflation. Unegbu called for increased production and improved security to address these issues.

Overall, while the decline in inflation figures is seen as a positive development, the persistent high prices and varied expert opinions suggest that Nigeria’s economic challenges are far from resolved.