Nigeria’s inflation rate hit 34.8% in December, a nearly 29-year high, mainly due to rising transportation costs. Food inflation slightly decreased, while core inflation increased. An overhaul of the inflation calculation methodology is set to occur, which may lower the rates. The central bank raised interest rates significantly in response to inflation pressures and will announce further decisions soon.
In December, Nigeria’s annual inflation rate surged to approximately 34.8%, nearing a 29-year peak, as reported by the National Bureau of Statistics. This figure represents a slight increase from November’s rate of 34.6% and was close to economists’ predictions of 34.9%. The rise in consumer prices was primarily attributed to escalating transportation costs. Meanwhile, food inflation saw a minor decrease to 39.8%, although core inflation, which excludes food and energy, rose to 29.3%.
Significantly, an overhaul of the methodology for calculating inflation is forthcoming, which may result in a lowered inflation rate. This will include adjusting the consumer price index, with a new base year of 2024. The rebasing will reduce the weight of food expenses from 51.8% to 40.1%, while the housing and energy sector will decline from 16.7% to 8.4%.
The elevated inflation levels prompted the Nigerian central bank to implement a significant interest rate increase of 875 basis points last year. Governor Olayemi Cardoso has indicated that price growth may begin to stabilize this year. The next interest rate decision is anticipated on February 18, which will provide further insight into the central bank’s response to current economic conditions.
Inflation remains one of the most pressing economic challenges faced by Nigeria, Africa’s most populous nation. The annual inflation rate has recently reached levels not seen in nearly three decades. Contributing factors include fluctuating transportation costs and a volatile food market. The National Bureau of Statistics is set to update its inflation calculation methods to provide more accurate and reflective data regarding consumer price movements.
In summary, Nigeria’s inflation rate has reached alarming heights, prompting significant measures from the central bank. The upcoming revision of inflation calculations may alter current perceptions of economic stability. Monitoring the changes in inflation data following this overhaul will be critical to understanding Nigeria’s economic trajectory and the central bank’s strategies moving forward.
Original Source: financialpost.com
