Nigeria’s annual inflation rate came down in July for the first time in almost two years, offering some relief to consumers burdened by the high cost of living. According to the National Bureau of Statistics, consumer prices rose 33.4% in July, down from 34.2% in June. This slight decrease was in line with the median estimate of 33.35% from eight economists surveyed by Bloomberg. Its English speaking neighbour, Ghana is however recording the fourth consecutive drop in inflation, to a lower rate of 20.9%.
This cooling of inflation could influence the Central Bank of Nigeria to maintain interest rates at their upcoming meeting in September, after having raised rates by 15.25 percentage points to 26.75% since 2022.
Central Bank Governor Olayemi Cardoso has emphasized the commitment to tackling inflation, hinting that interest rates might be reduced if price pressures continue to moderate. Bloomberg Economics suggests that Nigeria’s inflation may be entering a prolonged slowdown, aided by a stabilizing naira and high base effects. This could lead to the end of the rate-hiking cycle, with the policy rate potentially remaining stable at 26.75% through the end of 2024.
The inflation slowdown is expected to continue, supported by measures to lower food costs, such as a 180-day duty-free window for wheat and corn imports, and the diminishing impact of last year’s currency devaluation and partial removal of fuel subsidies. These reforms were introduced by President Bola Tinubu to attract investors, float the currency, and ease budget pressures.
However, the recent easing of inflation may not fully appease Nigerians frustrated by high prices. Earlier this month, protests erupted in several cities, with crowds demanding the reinstatement of full fuel subsidies, cuts to electricity tariffs, and reduced import duties. The demonstrations, which were met with a security crackdown resulting in at least 13 deaths, highlight the ongoing public discontent.
The primary factor driving the inflation slowdown was a decrease in food inflation, which fell to 39.5% in July from 40.9% in June. However, core inflation, which excludes agricultural produce and energy, edged up slightly to 27.5% from 27.4% in the previous month.
