Nigeria Inflation Increases To 22.79% As Food Prices Shoot Up

Nigeria's inflation has increased for the sixth month in a row to reach 22.79% in June--the highest in 17 years.

The National Bureau of Statistics (NBS) released a report on Monday, revealing that the prices of services and products have increased by 0.38% in the country last month.

"In June 2023, the Headline inflation rate rose to 22.79% relative to May 2023 headline inflation rate which was 22.41%," the NBS report said. "Looking at the movement, the June 2023 Headline inflation rate showed an increase of 0.38% points when compared to May 2023 headline inflation rate."

"On a year-on-year basis, the Headline inflation rate was 4.19% points higher compared to the rate recorded in June 2022, which was 18.60%. This shows that the Headline inflation rate (year-on-year basis) increased in June 2023 when compared to the same month in the preceding year (i.e., June 2022)," the report added.

The inflation comes a month after President Bola Tinubu removed the fuel subsidy in May.

According to the official Twitter handle of NBS, the inflation shown in June has not fully captured "the impact of the fuel subsidy removal and the unification of the exchange rate" as the data collection stops in the middle of the month.

Food and non-alcoholic drinks contributed the most to the rise in inflation, followed by housing, water, gas, electricity and fuels.

Even though the inflation was currently directly impacting the Nigerians, the economists explained that in the long run subsidy removal will help the country.

Segun Ajibola, a former president and chairman of the Council, Institute of Chartered Institute of Bankers of Nigeria, said the fundamental issues were still there in the country, adding, "We have to face the issues squarely to address the problem of inflation."

"It requires a holistic approach. So many things have to be harmonised and so many things have to be tackled. Especially things that push costs of production and those that affect agriculture," he said, Punch reported.

Ajibola further said he believed things will get better eventually as more expertise and more strategic policies will be initiated.

Yemi Kal, a partner and chief economist at KPMG Nigeria, said that subsidy removal has its benefits. However, he added there will be "disruption" as the prices of food will increase.

"This disruption has an indirect impact on the increase in food prices and consumer demand," he added. "This is so because their purchasing power is weakened; consumer demand also shrinks unless the government provides some kind of relief to cushion the effect."

Kal said the households will soon begin to cut their expenditures, which will lead to "businesses recording decreases in demand amid rising costs of operation increases."

This will also negatively impact Micro-Small and Medium-sized Enterprises and eventually encourage companies to lay off their employees, following which the unemployment rate is expected to rise in the country.