The inflation rate in Nigeria has reached new levels. Indeed, inflation in Nigeria has reached 24% in June 2023, according to the National Bureau of Statistics (NBS). This is the highest inflation rate in Nigeria since January 2017.
The main drivers of inflation are rising food prices, which have increased by 27.1% year-on-year, and transport costs, which have increased by 23.9%. Other contributors to inflation include housing, clothing, and utilities.
According to an article published by Business Insider Africa, the high inflation rate that Nigeria is experiencing is blamed on the ongoing reforms of President Bola Tinubu. The main blame of the article focuses on the removal of fuel subsidies that President Tinubu implemented in order to private the Nigerian oil market. However, some of the factors that led to inflation precede the Tinubu administration.
Before diving into the factors that propped up inflation to these high levels, it is essential to clarify that subsidies hurt markets and end up making things more expensive for the taxpayer. Oil subsidies are used to keep the price of oil artificially low. This can benefit consumers in the short term, but it can also lead to higher energy consumption and environmental problems. Oil subsidies have also been criticized for being unfair to taxpayers and for not helping the poorest people. This is why President Tinubu removed these fuel subsidies.
The current inflation rate in Nigeria is based on a set of factors. First, the War in Ukraine. The war has caused a global increase in food and energy prices. Nigeria is a major importer of food and energy, so this has put upward pressure on prices in the country.
Second, the naira has been depreciating against the US dollar. As a matter of fact, the naira has lost about 30% of its value against the US dollar in the past year. This has made imported goods more expensive, which has also contributed to inflation.
Third, The government has been printing more money to finance its budget deficit. This has also contributed to inflation.
Fourth, the aftermath of the pandemic has disrupted supply chains and caused shortages of some goods, which has also pushed up prices.
Lastly, the Nigerian economy is growing, which has led to increased demand for goods and services. This has also put upward pressure on prices.
The high inflation rate is putting a strain on household budgets and businesses and is making it difficult for the government to achieve its economic goals. The government has taken some measures to try to control inflation, such as increasing the interest rate and devaluing the naira, but these measures have had limited success.
The high inflation rate is having a negative impact on the Nigerian economy. It is making it more expensive for businesses to operate, which is leading to job losses and slower economic growth. It is also making it more difficult for households to make ends meet, which is increasing poverty.