Nigeria’s inflation rate rose to its highest in more than 27 years in December as food prices surged, exacerbating a cost-of-living crisis and piling more pressure on the central bank to raise interest rates.
Consumer inflation rose for the 12th straight month in December to 28.92% year on year from November’s 28.20%, the National Bureau of Statistics said on Monday.
Inflation in Africa’s biggest economy and most populous nation has not climbed this high since mid-1996.
The food inflation rate, which accounts for the bulk of Nigeria’s inflation basket, rose to 33.93% in December from 32.84% a month earlier.
The statistics office said prices rose for a broad range of food items including bread and cereals, oil, fish, meat, fruit and eggs.
Analysts say higher fuel prices and a weaker naira currency have also stoked price pressures.
David Omojomolo, Africa economist at Capital Economics, said “inflationary pressures are only likely to build from here,” citing second-round effects from the removal of a fuel subsidy last year and naira weakness.
He predicted that inflation would breach 30% by the end of the first quarter and said it was unlikely to peak until the middle of 2024.
President Bola Tinubu last May embarked on Nigeria’s boldest reforms in decades by scrapping a costly but popular fuel subsidy and devaluing the currency to try to revive economic growth. But growth is yet to pick up while inflation has worsened.
Central Bank of Nigeria (CBN) Governor Olayemi Cardoso is yet to hold a rate-setting meeting since taking office in September.
“At the next meeting, we think that the CBN will need to raise rates by 400 basis points, to 22.75%, to show that it is taking the inflation fight more seriously,” Capital Economics’ Omojomolo said in a research note.
“There’s a clear risk, though, the CBN underwhelms again. Doing so would undermine much of the momentum and optimism around the policy shift that President Tinubu started last year.”
