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Nigeria Inflation July 2023

Nigeria: Inflation overshoots expectations and comes in at a near-two-decade high in July

Inflation came in at 24.1% in July, up from June’s 22.8%. July’s reading was the highest since September 2005. The print, which overshot market expectations of a 23.6% rise, was nearly three times higher than the upper bound of the Central Bank of Nigeria’s 6.0–9.0% target band.

Looking at the details of the release, the acceleration was primarily due to prices for food—which accounts for the lion’s share of the inflation basket—rising at a steeper rate. In addition, price pressures for transportation grew at a quicker pace. This was partly the result of the scrapping of the costly fuel subsidy in late May, which led to a tripling of petrol prices. Moreover, President Tinubu ended restrictions on foreign exchange trading in June, leading the naira to plunge over 40% against the U.S. dollar in the same month and hit a record low in the parallel market, fueling inflation further.

Accordingly, the trend pointed up, with annual average inflation coming in at 21.9% in July (June: 21.5%). Meanwhile, core inflation rose to 20.8% in July from the previous month’s 20.3%.

Lastly, consumer prices rose 2.89% from the previous month in July, picking up from June’s 2.13% rise. July’s result was the highest reading since January 2012.

Recently deployed reforms will continue to ignite inflation in the short term, exacerbating the country’s cost-of-living crisis. The Central Bank has already hiked rates to their highest level in nearly 20 years, and recently released data could prompt it to extend its longest policy tightening cycle in years and deliver its ninth consecutive rate hike at its next meeting set for 25–26 September.

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