According to the National Bureau of Statistics, Nigeria saw its first slowdown in annual Inflation in almost two years in July, with rates falling from 34.2% in June to 33.4% in July. This decline was marginally higher than the median prediction of 33.35% made by Bloomberg’s panel of experts. Following a string of rate increases that have increased borrowing rates by 15.25 percentage points since 2022, the Central Bank of Nigeria may decide to keep its current Interest Rate of 26.75% at its next September meeting in response to the inflationary slowdown.
Olayemi Cardoso, the governor of the central bank, has pledged to fight inflation and hinted that interest rates may be lowered in the future if price pressures continue to subside. The naira’s stabilizing value and the benefits of a high comparison base, according to analysts like Yvonne Mhango, should keep Nigeria’s inflation from rising further. The government’s policies, which include a brief duty-free period for importing grain and wheat, the waning effects of the depreciation of the currency from the previous year, and the partial elimination of Fuel Subsidies are also credited for reducing inflation.
Presidential Reforms might aid a continuous decline.
It is anticipated that President Bola Tinubu’s economic reforms—which seek to draw in investors, steady the currency, and ease budgetary pressures—will aid in the continuous inflationary decline. But these changes have also caused anger among the populace; demonstrations have broken out in a number of towns calling for the restoration of gasoline Subsidies as well as a decrease in import levies and energy rates. The slowdown in food inflation, which dropped from 40.9% in June to 39.5% in July, was the main cause of the inflationary slowdown; core inflation, which does not include food and energy, increased somewhat to 27.5%.
Over the course of the last ten years, Nigeria’s inflation rate has experienced notable oscillations, primarily stemming from local policy decisions, global economic conditions, and structural issues. Inflation averaged between 8 and 9% on average between 2013 and 2015. But the nation saw a significant uptick in inflation in 2016, and by 2017, it had reached a peak of 18.6%. Several causes contributed to this spike, such as the sharp decline in oil prices around the world, which decreased foreign exchange reserves and government revenue, and the sharp depreciation of the naira.
Gov’t intends to rid the market of subsidies to reduce market distortions.
President Bola Tinubu has implemented a number of noteworthy economic reforms since taking office in May 2023 with the goals of bringing Investment to Nigeria, steadying the country’s economy, and relieving budgetary pressure. Fuel subsidies were eliminated, which was a major change that relieved the government of a long-standing financial burden. The government intends to rid the market of these subsidies in order to reduce market distortions and free up money for social and infrastructural projects.
Furthermore, the Naira has been allowed to find its market value under Tinubu’s administration, as opposed to being artificially anchored. Although the goal of this measure was to increase Nigeria’s competitiveness and draw in foreign investment, the depreciation of the naira caused an early inflationary jump. Nigerians living in daily life have been greatly impacted by the country’s high inflation rate, particularly those who come from low-income families. People’s dissatisfaction with the high Cost Of Living was made evident during protests earlier this month in a number of Nigerian cities.
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Marching through the streets, demonstrators screamed “we are hungry” and demanded that import levies and power Tariffs be lowered as well as the reintroduction of gasoline subsidies. Tension has only increased as a result of the government’s response to these rallies, which included a Security crackdown that claimed multiple lives. All things considered, the economic strains have raised rates of poverty, reduced many Nigerians’ standards of living, and sparked significant social upheaval. In the upcoming months, the government’s capacity to control inflation, generate employment, and provide social safety nets will be essential to easing these sufferings.