Nigeria’s annual inflation increased to 34.8% in December, reaching a near 29-year high as data revisions loom. Transportation has driven price hikes, while food inflation showed slight moderation. Key adjustments to the consumer price index will take place in 2024, potentially softening future inflation readings. The central bank raised interest rates significantly last year, aiming to control inflationary trends.
Nigeria’s annual inflation rate reached a near 29-year high of 34.8% in December, marking an increase from 34.6% in November. This surge came ahead of an anticipated overhaul of inflation data by the National Bureau of Statistics (NBS) which may result in a reduction of this rate. Economists had projected a slightly higher increase, with a median forecast of 34.9%. Notably, transportation costs have been the primary contributor to rising consumer prices, while food inflation eased slightly to 39.8%.
The upcoming data revision will revise the methodology that has not seen updates in 16 years. The NBS will adjust the consumer price index with a new reference year of 2024, changing the weighting of items that constitute the index. Consequently, the proportion of food, a major expense for households, will decrease from 51.8% to 40.1%. Additionally, the housing, energy, and electricity categories are set to shrink from 16.7% to 8.4%.
The ongoing inflation crisis has compelled Nigeria’s central bank to escalate its key interest rate, has risen by 875 basis points last year. These measures reflect efforts to counteract rising prices. Governor Olayemi Cardoso expressed expectations that price growth will begin to decelerate within the year. The central bank’s next interest rate decision is scheduled for February 18.
The context of Nigeria’s inflation rate highlights significant economic challenges facing the nation, particularly as it nears a 29-year high. Inflation data is critical for both economic stability and planning for households and businesses alike. The recent inflationary pressures are largely attributed to increased transportation costs, while plateaus in food prices indicate some easing in consumer pressure. The upcoming methodological changes by the NBS are expected to alter public perceptions regarding inflation and may impact economic policy going forward, especially in relation to interest rates and monetary policy decisions.
In conclusion, Nigeria’s inflation rate has surged to a near 29-year high, prompting a reevaluation of inflation data methodologies. As prices continue to rise, particularly in the transportation sector, it is crucial for adjustments to the consumer price index to take place. The central bank’s significant interest rate changes signal a proactive approach to managing inflation, with expectations of easing growth later this year. The upcoming adjustments and their implications will be closely monitored by economists and stakeholders alike.
Original Source: financialpost.com
