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| Headline CPI (YoY): May’s Headline CPI (YoY) was 33.95%, up from 33.69% in April. Month-on-month, the headline inflation rate for May 2024 decreased slightly to 2.14%, down 0.15% from April’s 2.29%. Core CPI (YoY): Core inflation, excluding volatile agricultural produce and energy prices, stood at 27.04% in May, compared to 26.84% in April 2024. Year-on-year, it rose significantly by 7.21% from 19.83% in May 2023. Food Inflation: Food inflation, a major driver, rose to 40.66% in May, slightly up from 40.53% in April. Year-on-year, it surged by 15.84% from 24.82% in May 2023. This increase was driven by higher prices for millet flour, Garri, beans, wheat flour (prepacked), Semovita, and other food items. |
 Source: Comercio Partners | NBSInsight: A Lukewarm Cooling Headline inflation has simmered down a bit, showing a slight overall rise. But don’t get too comfortable—core inflation and food inflation, the main culprits, have nudged up. This mixed bag suggests that while the general inflation rate is catching a breather, essential goods and services are still feeling the heat. Month-on-month, headline inflation hints at a cool-down. Yet, the stubbornly high core and food inflation levels reveal a slow and uneven chill across different sectors. |
| Economic Impact: Pressures on Spending and Investment High inflation, particularly in food prices, has eroded purchasing power, negatively impacting consumer spending – a critical driver of economic growth. Persistent core inflation suggests underlying cost pressures remain, influencing business costs and investment decisions. Several companies, including Huggies, Microsoft, and Meta, have shut down operations due to the harsh macroeconomic environment. These closures highlight the unfavourable conditions for business operations, likely leading to increased unemployment and reduced consumer spending power. Also, the ongoing discussion about increasing the minimum wage could lead to further inflationary pressures, as increased consumer spending drives up prices, potentially offsetting the benefits of higher wages. The World Bank’s recent approval of a $2.25bn loan for two major “financial support packages however offers short-term relief provided they are put into appropriate use or the purpose for which it was granted. However, it is insufficient to address the deeper, systemic issues causing economic strain. While inflation shows signs of a slight slowdown, it remains at a high level. Significant relief from high prices is unlikely in the immediate future for Nigerians. |
| What has been done to curtail inflation? Stringent Benchmark Interest Rate: In a bid to counter soaring inflation, the Central Bank’s decision to elevate the benchmark interest rate to a historic 24.75% underscores its commitment to inflation containment. However, this comes at a cost, as an aggressive hawkish policy is detouring growth. Recent CBN Initiatives: Various policies, including restrictions on loan repayment in foreign currency and interventions in the International Money Transfer Operators (IMTO) sector, have contributed to currency stabilization, with the naira appreciating to N1,070/$1(as of the time of writing). Nonetheless, the time lag associated with businesses adjusting prices may delay the full impact of these measures. Imported Food Dynamics: The apex bank’s effort to defend the naira has yielded good fruit, as the naira has appreciated from N2000/$1 to N1,070/$1, indicating that imported products are comparatively less expensive. Given that Nigeria is import-dependent, the appreciation of the exchange rate is expected to have a desired impact on inflation. |
| Bottom Line To stabilize the macroeconomic environment and foster conditions conducive to business operations, more robust and targeted fiscal interventions from the government are necessary. These policies should aim to: • Enhance supply chain efficiencies. • Provide tax relief and incentives for manufacturers. • Improve infrastructure to reduce production and distribution costs. • Implement measures to stabilize the currency. While monetary policy has shown some effectiveness in controlling inflation incrementally, the overall economic situation remains challenging. Business closures and rising unemployment underline the need for comprehensive fiscal strategies to create a sustainable and growth-friendly economic environment. |
