Nigeria Economic Update, Issue 2

According to the Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS), headline inflation rose to 34.8% in December 2024, a 0.20% points increase from 34.60% recorded in November 2024. This is 13.4% points higher than the 21.4% targeted by the Central Bank. On a year-on-year basis, headline inflation was 5.87% points higher in December 2024 compared to December 2023. Urban inflation increased by 6.30% points year-on-year to 37.29% in December 2024 from 31.00% in December 2023. Similarly, on a year-on-year basis, rural inflation rose by 5.37% points to 32.47% in December 2024 from 27.10% in December 2023. Key contributors to the rising inflation include food and non-alcoholic beverages, housing, water, electricity, and gas. However, the year-on-year increase reflects a significant rise in the cost of living compared to the same month in the previous year, driven by economic challenges such as weak currency, high energy costs, and supply chain disruptions. The continued rise in inflation implies a substantial decline in purchasing power, severely affecting low-skill individuals. Additionally, higher inflation rates in urban areas compared to rural areas indicate rising costs of food and essential items and may result in civil unrest. To mitigate these effects, the government should implement temporary subsidies for essential goods, such as food and energy, to cushion the impact on vulnerable households. Furthermore, currency-stabilizing monetary policies are essential to reduce imported inflation caused by currency depreciation

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