By Charles Igwe
In June 2023, Nigeria’s inflation rate climbed to 22.79% year-on-year, surpassing the previous month’s rate of 22.41%. Analysts were somewhat surprised by the moderate increase, as it was lower than their projections, considering the reforms in the petroleum and foreign exchange sectors, which had driven up prices in June.
The National Bureau of Statistics (NBS) reported that food inflation also accelerated, reaching 25.25% year-on-year in June, compared to 24.82% in May. According to the NBS, “On a year-on-year basis, the headline inflation rate was 4.19 percentage points higher compared to the rate recorded in June 2022, which was 18.6 percent.”
The NBS further explained, “On a year-on-year basis, the urban inflation rate in June 2023 was 24.33 percent, which was 5.23 percentage points higher compared to the 19.09 percent recorded in June 2022. The rural inflation rate in June 2023 was 21.37 percent on a year-on-year basis, which was 3.25 percentage points higher compared to the 18.13 percent recorded in June 2022.”
Regarding food inflation, the NBS stated, “The food inflation rate in June 2023 was 25.25 percent on a year-on-year basis, which was 4.65 percentage points higher compared to the rate recorded in June 2022 (20.6 percent). The rise in food inflation on a year-on-year basis was caused by increases in prices of oil and fat, bread and cereals, fish, potatoes, yam and other tubers, fruits, meat, vegetable, milk, cheese, and eggs.”
Analysts at CardinalStone Research expressed their surprise, stating, “The outturn defied expectations and printed materially lower than our projection of 25.0%, with deviations stemming from a positive surprise in the core inflation basket.” They also noted that despite the lower-than-expected inflation rate, there is still potential for inflationary pressures in the coming months due to the lagged impact of subsidy removal and the recent increase in parallel market rates.
Cordros Research analysts added that they anticipate continued pressures on food inflation in July, citing higher transport costs and potential risks to imported food prices. They also mentioned the beginning of the lean season in the north and increased flooding in the southern region, which could widen the food demand-supply gap and lead to further price increases.
Overall, Nigeria continues to grapple with inflationary challenges, particularly in the food sector, as the impact of various factors such as subsidy removal and exchange rate fluctuations continue to affect prices in the country.