On Monday, the National Bureau of Statistics (NBS) disclosed that Nigeria’s inflation rate rose to a 17-year high of 19.64% in July 2022. The heightened inflation rate is despite the efforts by Nigeria’s financial institutions to address the situation, including the Monetary Policy Committee (MPC) increasing the interest rate to 14% in July 2022 from 11% in January 2022.
Regardless, the inflation rate continues to rise. And leading to the massive cut in the purchasing power of Nigerians. For context, the last time Nigeria suffered a 19% average inflation was in 2005 under the leadership of President Olusegun Obasanjo. At the time, Nigeria’s inflation rate spiked from a single digit in January 2005 to a whooping 28.2% by August of the same year.
In 2008, 2010, 2017 and 2021 inflation rates also reached elevated levels, but the figures of July 2022 was the first time Nigeria would experience a 19% year-on-year (YoY) change in the inflation levels since 2005.
Major Drivers of Nigeria’s Inflation Rate
According to the data released by NBS, the top six drivers of Nigeria’s inflation include food, household spending, clothes and footwear, transportation, furnishing, education and health. These components have continued on an upward trend since March 2022.
- In terms of contribution to inflation, increased food prices account for about 50% of the country’s total inflation. Food prices have spiked from 17% in January to 22% in July.
- It is important to note that the impact of Nigeria’s high inflation rate is severe due to the fact that the major drivers of the country’s inflation are basic items Nigerians spend money on.
What you should know
To tackle Nigeria’s high inflation rates, the country needs to improve the agricultural sector to obtain more yields from farm produce, cut operating costs for farmers and support the manufacturing sector.