Emmanuel OchayiNigeria’s inflation rate could decline to 34.5% by December 2024, according to a new report from Afrinvest Research. This projection indicates a slight drop of 0.1 percentage points from November’s inflation rate of 34.6%, as reported by the National Bureau of Statistics (NBS).
This anticipated drop is tied to two critical factors: a high base effect in the food inflation sub-basket and the strengthening of the naira exchange rate. The naira is expected to stabilise below N1,600/$ levels, easing pressure on consumer prices.
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Food inflation, which reached 39.9% in November, remains a significant driver of overall inflation. November’s rate marked the highest food inflation in five months, largely due to poor main harvests caused by widespread flooding that destroyed 700,000 hectares of farmland.
Additionally, insecurity in agricultural regions and weak mechanisation have contributed to supply disruptions, further pushing up food prices. On a month-on-month basis, food inflation showed a marginal increase of 2.98%, reflecting ongoing challenges in the sector.
Core Trends
Core inflation, which excludes food and energy prices, also reached a historic high of 28.8% year-on-year in November. However, a month-on-month decline was noted, with core inflation easing to 1.8%, the lowest rate recorded in the past year.
The report linked this moderation to a 3.8% drop in petrol prices, with the average cost of PMS standing at N1,140 per litre in November. Improved exchange rates for the naira, recorded at N1,672/$ in the official market and N1,720/$ in the parallel market, also played a role in easing the core ones.
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Sectoral Insights on Inflation
In November, the transportation and communication sectors experienced slower price increases compared to previous months. Transportation prices rose by 18.5 percentage points, a drop from October’s 20.1%. Communication costs also showed a marginal increase of 0.4 percentage points, down from 0.8% in October.
These improvements highlight the potential for inflationary pressures to ease further if favourable economic conditions persist.
Full-Year Forecast
Afrinvest projects that Nigeria’s inflation rate will average 33.1% for 2024, significantly higher than the Federal Government’s target of 21.4%. This underscores the need for more robust policy measures to address the root causes of inflation and stabilise the economy.
Economic analysts emphasise the importance of exchange rate stability, enhanced agricultural productivity, and improved security to sustain progress in curbing it.
Policy Recommendations to Manage Inflation
Experts recommend that Nigeria adopt policies aimed at strengthening the naira, supporting agricultural output, and addressing insecurity.
Stabilising these factors is essential for achieving a sustained reduction in the rates and fostering economic growth.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
