Inflation at 34.8% Raises Economic Concerns

The Organised Private Sector (OPS) has voiced concerns over Nigeria’s persistent inflationary pressures, noting that the surge will further increase production costs, including raw materials, logistics, machinery, and more.

The National Bureau of Statistics (NBS) reported on Wednesday that Nigeria’s inflation rate reached 34.80% in December 2024, a slight increase from 34.60% in November.

The Consumer Price Index (CPI) indicated that the marginal increase of 0.20% was due to the heightened demand for goods and services during the festive season.

On a year-on-year comparison, December’s inflation rate was up by 5.87 percentage points from the 28.92% recorded in December 2023, marking an ongoing rise in consumer prices driven by challenges such as currency depreciation, high energy costs, and supply chain disruptions.

For the 12 months ending December 2024, the average inflation rate stood at 33.24%, an increase from 24.66% recorded in 2023.

The NBS report further explained that the headline inflation rate for December 2024 was 34.80%, slightly higher than November’s 34.60%. This increase was attributed to seasonal demand during the festive period.

The year-on-year inflation rate for December 2024 was 5.87% higher than December 2023, highlighting a continued rise in inflation. Food and non-alcoholic beverages contributed the most to the inflationary pressure, accounting for 18.02%, followed by housing, water, electricity, gas, and fuels at 5.82%, and transport at 2.26%. Smaller contributions came from health (1.05%) and communication (0.24%).

Urban inflation for December 2024 was higher than rural inflation, standing at 37.29% year-on-year, compared to 31.00% in December 2023. Meanwhile, rural inflation reached 32.47%, up from 27.10% a year earlier. Both urban and rural inflation rates saw slight declines on a month-on-month basis.

Food inflation continued its upward trajectory, reaching 39.84% in December 2024, compared to 33.93% in December 2023. This rise was mainly due to price increases for staples such as yams, rice, maize, and dried fish. However, on a month-on-month basis, food inflation eased slightly to 2.66% from 2.98% in November, thanks to price reductions in items like local beer, soft drinks, and tubers.

Core inflation, which excludes volatile agricultural and energy items, stood at 29.28% year-on-year in December 2024, an increase from 23.06% in December 2023.

The OPS responded by stressing the negative impacts of rising inflation on the private sector. Segun Kuti-George, Vice President of the Nigerian Association of Small-Scale Industrialists, noted that higher production costs would lead to higher product prices, reducing consumers’ purchasing power and potentially driving people toward cheaper imported goods. He also criticized the inefficacy of interest rate hikes, which are meant to curb inflation but have not been successful in Nigeria.

Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria, emphasized the adverse effects of inflation on the economy, such as reduced consumer purchasing power, increased production costs, and diminished profitability. He also pointed out that inflation has led to reduced exports and lower competitiveness in international markets.

Olusola Obadimu, Director-General of the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), warned that cost-push inflation will make it challenging to contain inflation. He explained that the rising cost of inputs, such as raw materials and accessible capital, due to higher interest rates, exacerbates the situation. NACCIMA suggested that the government focus on reducing input costs to bring down prices, improve business competitiveness, and control fiscal discipline, particularly in the public sector.

Dr. Muda Yusuf, Director of the Centre for Promotion of Private Enterprise (CPPE), observed that despite the marginal increase in inflation, the overall inflationary trend is still concerning. However, he noted that the inflation outlook for 2025 could improve, citing potential moderations in exchange rate volatility and geopolitical tensions, as well as a strong base effect from 2024’s high inflation. He recommended pausing further interest rate hikes and focusing on policies that can reduce fiscal deficits and support business growth.

Yusuf also highlighted that excessive revenue targets for ministries and agencies could exacerbate inflationary pressures and hinder investment. Instead, he suggested that revenue targets should be based on empirical studies to avoid harmful economic consequences.