The Organised Private Sector (OPS) has expressed growing concern over the persistent rise in Nigeria’s inflation rate, warning that this ongoing trend will significantly increase the cost of production, raw materials, logistics, machinery, and other key inputs required for business operations. This rise in inflation poses serious risks to the overall economic climate, potentially worsening the financial situation for many businesses and citizens alike.
On Wednesday, the National Bureau of Statistics (NBS) reported that Nigeria’s inflation rate climbed to a concerning 34.80% in December 2024, showing a slight uptick from the 34.60% rate recorded in November. While the increase might appear minimal, it nonetheless highlights a continuing upward trajectory of prices in the country, which remains a major issue for citizens and businesses alike.
The latest Consumer Price Index (CPI) report attributed this marginal 0.20% increase to heightened demand for goods and services typically observed during the festive season, underscoring the influence of seasonal spending on inflationary trends. Despite this seasonal uptick, the broader inflationary pressures are driven by more persistent factors, including currency depreciation, energy price hikes, and supply chain disruptions that have proven difficult to mitigate.[/b]
In terms of yearly comparisons, the December inflation rate showed a significant 5.87 percentage point increase from the 28.92% recorded in December 2023, underlining the continued rise in consumer prices over the past year. This surge has been exacerbated by several structural issues within the economy, including the rising costs of basic goods, services, and transportation. These inflationary challenges are compounded by other factors such as global market fluctuations, import costs, and local production inefficiencies.
The NBS also highlighted that the average inflation rate for the 12-month period ending December 2024 stood at 33.24%, a notable increase from 24.66% during the same period in 2023. This suggests that the inflationary pressure felt by Nigerian consumers and businesses is not only continuing but is escalating at an alarming rate. The report noted that while inflation pressures may have been exacerbated by short-term seasonal factors, the underlying economic difficulties are more profound and persistent, likely requiring substantial policy interventions to address.
According to the NBS statement: “In December 2024, the headline inflation rate was 34.80% relative to November 2024’s rate of 34.60%. The marginal increase of 0.20% was driven by the December festive season’s heightened demand for goods and services. Year-on-year, the headline inflation rate was 5.87 percentage points higher than the 28.92% recorded in December 2023, showing a continued rise in consumer prices.”
The report also revealed that food and non-alcoholic beverages were the primary drivers of inflation, contributing 18.02% to the overall inflation figure. Other significant contributors to the rate included housing, water, electricity, gas, and other fuels, which accounted for 5.82% of the inflation, followed by transport with 2.26%. Other smaller contributions came from sectors such as health, which contributed 1.05%, and communication, which added a smaller 0.24% to the overall inflation rate.
In terms of geographical disparities, urban inflation outpaced rural inflation, with urban inflation reaching a year-on-year rate of 37.29% in December 2024. This marks a 6.30 percentage point increase from December 2023’s 31.00%. On a month-on-month basis, urban inflation showed a slight decline, dropping to 2.56% from November’s 2.77%, which may be a positive sign for urban residents. In contrast, rural inflation rose to 32.47% year-on-year in December 2024, a 5.37 percentage point increase from 27.10% in December 2023. Rural month-on-month inflation slightly dropped to 2.32% from November’s 2.51%. These differences highlight the varying economic challenges faced by urban and rural populations in Nigeria.
Food inflation reached an alarming 39.84% year-on-year in December 2024, an increase from 33.93% in December 2023. The higher prices for staples such as yams, rice, maize, and dried fish have significantly impacted food costs, further reducing consumer purchasing power. However, on a month-on-month basis, food inflation showed a slight decrease, easing to 2.66% from November’s 2.98%, influenced by price reductions in certain food items like local beer, soft drinks, and tubers. This slight decline might offer a glimmer of hope but does not alleviate the larger concern regarding high food prices.
Core inflation, which excludes volatile agricultural produce and energy, stood at 29.28% year-on-year in December 2024, a sharp rise from 23.06% in December 2023. This indicates a growing challenge in sectors such as transport, meals at local restaurants, and personal grooming services, which have experienced the sharpest price increases. This type of inflation reflects the broader cost pressures in everyday services and activities that are critical to consumers’ daily lives.
OPS Reactions
Segun Kuti-George, the National Vice President of the Nigerian Association of Small-Scale Industrialists, warned that the inflation hike would escalate production costs, further making locally manufactured goods less affordable for consumers. He noted, “The rising cost of raw materials, logistics, machinery, and other inputs means higher prices for products, reducing consumers’ purchasing power and increasing inventory levels. This creates a vicious cycle. If imported goods become cheaper than locally manufactured ones, it could lead to more business closures.”
Kuti-George also expressed concern over the ineffectiveness of interest rate hikes in curbing inflation, adding, “It seems the Nigerian economy is defying economic theories.” His remarks suggest that despite various interventions from the government and central bank, the inflationary trends persist, complicating efforts to stabilize the country’s economic situation.
Similarly, Dr. Femi Egbesola, National President of the Association of Small Business Owners of Nigeria, highlighted the damaging effects of inflation on the private sector and the broader economy. “Inflation has eroded consumers’ purchasing power, increased production costs, and reduced profitability. It has made businesses less attractive to investors, reduced exports, and stunted economic growth, leading to higher unemployment, lower national income, and increased poverty,” he said.
Dr. Egbesola further emphasized that rising inflation has eroded savings and investments in the private sector while significantly increasing governance costs, complicating the country’s ability to address the myriad of socio-economic challenges facing it today.
Olusola Obadimu, Director-General of the Nigeria Association of Chambers of Commerce, Industry, Mines, and Agriculture, attributed the inflation surge to cost-push factors and explained that managing the inflation under current conditions would be incredibly difficult. He remarked, “Nigeria’s inflation remains high despite the Central Bank’s repeated hikes in the monetary policy rate, which were never sufficient to effectively address inflationary pressures.” His comments underscore the complexity of the inflation crisis in Nigeria and the challenges faced by policymakers in tackling it effectively.
