Nigeria’s inflation rate surged to 34.80 per cent in December 2024, marking a slight increase from 34.60 per cent in November, according to the National Bureau of Statistics (NBS) report released on Wednesday.
This rise reflects heightened demand for goods and services during the festive season, contributing to a year-on-year increase of 5.87 per cent from 28.92 per cent in December 2023.
This marks the final inflation figure calculated using the current methodology before a rebasing scheduled for later this month, which will adjust the base year to 2024 to reflect recent economic changes, including subsidy removals and an expanded inflation basket from 740 to 960 items.
This inflationary trend has prompted concerns among economists and policymakers, particularly ahead of an anticipated data overhaul later this month that would most likely adjust these figures downward.
Food inflation reached a staggering 39.84 per cent, further straining household budgets as citizens sought cheaper alternatives amid rising prices. The NBS noted a month-on-month inflation rate of 2.44 per cent, slightly lower than November’s 2.64 per cent, indicating a deceleration in price increases.
The steep rise in food inflation, which reached 39.84 per cent in December 2024—up from 33.93 per cent in December 2023—is a primary driver of the overall inflation surge.
The NBS attributed this spike to increased prices of essential commodities such as yam, sweet potatoes, and beer. The December festive season also played a significant role, with heightened demand for goods and services further exacerbating inflationary pressures.
The rapid rise in inflation, particularly in food prices, is likely to deepen the cost of living crisis for Nigerians. The poor and vulnerable populations will bear the brunt, as the costs of staple food items like rice, maize, and tubers remain high.
Sokoto, Zamfara, and Edo states, which recorded the highest food inflation rates (57.47 per cent, 46.39 per cent, and 46.32 per cent, respectively), may face increasing food insecurity and social unrest.
The increase in urban inflation to 37.29 per cent and rural inflation to 32.47 per cent highlights the pervasive nature of the crisis. Urban residents, already grappling with high transportation and housing costs, will find it harder to make ends meet.
Meanwhile, rural households, whose incomes are tied to agriculture, may face dwindling purchasing power, especially if input costs for farming continue to rise.
High inflation erodes consumer purchasing power, which could result in reduced demand for goods and services. This, in turn, may strain businesses, particularly small and medium enterprises (SMEs), which form the backbone of Nigeria’s economy.
Also, companies may struggle to maintain profitability amid rising input costs, potentially leading to layoffs and increased unemployment.
Persistent inflation and economic instability could deter foreign and domestic investors. Uncertainty around price stability and profitability may make Nigeria less attractive to investors, further hampering economic recovery efforts.
The NBS noted a slight month-on-month decline in the pace of inflationary growth. Headline inflation on a month-on-month basis stood at 2.44 per cent in December 2024, down from 2.64 per cent in November 2024.
Similarly, food inflation rose by 2.66 per cent in December, a decrease from November’s 2.98 per cent. These marginal declines suggest that inflationary pressures may be easing slightly, offering a glimmer of hope for policymakers.
The decline in the prices of certain food items, including local beer, fruit juices, and cereals, points to potential areas where interventions may yield results. However, these improvements are too modest to offset the broader inflationary trends.
The increase in inflation was primarily attributed to the higher core prices despite a moderation in food inflation. Food inflation had slowed by eight basis points to 39.84 per cent. Despite the slower food prices, the outturn remains above 2024FY average (+39.10 per cent) due to higher prices of the following items; Yam, Water Yam, Coco Yam (Potatoes, Yam & Other Tubers Class), Guinea Corn, Maize Grains, Rice (Bread and Cereals Class), Beer, Pinto (Tobacco Class), and Palm Oil, Vegetable Oil (Oil and Fats Class. On a month-on-month basis, food inflation moderated to 2.66 per cent, relative to the 2.98 per cent m/m recorded in the previous month.
Core inflation, which is all items less farm produce and energy, expanded by 53bps to 29.28 per cent year on year from 28.75 per cent in November. The highest increases were recorded in prices of the following items; Taxi journey per drop, Bus journey intercity, Journey by motorcycle, (under Passenger Transport by Road Class), Rents (Actual and Imputed Rentals for Housing Class), Meal at a local Restaurant (Accommodation Service Class), and hair cut service, women’s hairdressing (Hairdressing salons & personal grooming establishments Class). The core index surged by 41 bps to 2.24 per cent m/m in December 2024 compared to the previous month (November: 1.83 per cent m/m).
Speaking on December inflation, the director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf stated that inflationary pressures continue to be a troubling feature of the Nigerian economy as reflected in the December Inflation numbers.
He noted that though the increase in the December headline inflation was marginal at 0.2 per cent compared with November inflation figures.
He added that, “the inflation outlook for 2025 promises to be positive for the following reasons: sustained moderation in exchange rate volatility; improvements in foreign reserves; prospects of easing geopolitical tensions with the inception of Trump presidency in few days time; and a strong base effect, given the high inflationary pressures experienced in 2024.”
To ensure a further Moderation in inflationary pressures, CPPE recommended pause on monetary policy tightening and interest rate hikes by the CBN to reduce business operating costs; and reduction in fiscal risks to macroeconomic stability through a reduction in fiscal deficit and deceleration in growth of public debt.
Yusuf stated that, “CPPE is worried about the current fixation of the National assembly on revenue, especially the arbitrary revenue targets for MDAs. Excessive pressure on MDAs to boost revenue and increase IGR has profound inflationary implications. Reality is that Such pressures are invariably transmitted to investors in form of higher fees, levies, penalties, import duties, regulatory charges etc. These outcomes are in conflict with government aspirations to boost investment, curb inflation and create jobs.”
He pointed out that revenue targets should be based on empirical studies, absorptive capacity of the economy and due consideration of the wider economic implications, explaining that “obsession with revenue would hurt investments, worsen inflationary pressures, aggravate poverty and impede economic growth. There should be a careful balance between revenue growth aspirations, desire to boost investment and commitment to moderate inflation.”
As Nigeria grapples with economic challenges, including currency depreciation and high energy costs, the Central Bank faces pressure to implement tighter monetary policies to stabilise prices.