Nigeria is projected to experience a further rise in inflation rates in September 2024, largely driven by a significant hike in gasoline prices.
This is according to the World Bank’s latest report, Africa’s Pulse, which was seen by Nairametrics.
The report noted that the government’s decision to implement market-based pricing, which initially tripled gasoline prices in May 2023, has led to an additional 40-45% rise in fuel costs in September 2024.
This development is expected to exacerbate inflationary pressures, with transportation and production costs rising sharply, leading to higher prices for goods and services across the country.
This rise in inflation follows a trend that began in June 2024, when headline inflation peaked, influenced heavily by increases in fuel prices and the subsequent rise in transportation and production costs.
The higher cost of fuel has had a ripple effect on various sectors, pushing up the prices of goods and services across the country.
The report read: “While the inflationary effects of a weakened naira in the first months of this year and the removal of the gasoline subsidy in the second half of 2023 appeared to be gradually subsiding, a further increase in gasoline prices by 40-45 percent in September may reverse the disinflationary trend. The consolidation of macroeconomic reforms should support higher growth in the country in 2025.”
Naira among worst performing currencies
The report also noted that the naira has been one of the worst-performing currencies in Sub-Saharan Africa in 2024, depreciating by 43% year-to-date by the end of August.
The report read: “Ethiopia, Ghana, and Nigeria are among the worst performing in Africa this year, and their currencies continue weakening while demand for foreign exchange remains pressing. Measures to mitigate social unrest associated with the high cost of living in Angola (doubling of the minimum wage) and Nigeria (partially reinstating fuel subsidies) are putting pressure on their public finances.”
The devaluation of the currency has further amplified inflationary pressures, making imported goods and services more expensive and reducing the purchasing power of Nigerian consumers.
This weakening of the naira has compounded the effects of rising fuel prices, particularly in the transportation sector, which heavily relies on imported petroleum products.
Despite fiscal tightening measures and reforms aimed at stabilizing the economy, the World Bank projects that Nigeria’s inflation will remain elevated in the coming months.
Nigeria’s economy to grow by 3.3% this year
Nigeria’s economic growth is projected to recover modestly, with a 3.3% Gross Domestic Product (GDP) growth forecast for 2024.
It noted that the economy will slightly accelerate to 3.6% in 2025-2026.
The report read: “Economic growth in Nigeria is projected at 3.3 percent in 2024 and 3.6 percent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results. Inflation peaked in June 2024 (at 34.2 percent year-on-year) and decelerated to 33.4 percent in July and further to 32.2 percent in August.”
What you should know
The headline inflation rate in August 2024 stood at 32.15%, marking a slight decrease of 1.25%-points from 33.40% in July 2024, according to the National Bureau of Statistics (NBS).
Despite this reduction on a month-to-month basis, when compared year-on-year, the August 2024 headline inflation rate increased by 6.35%-points from the 25.80% recorded in August 2023, indicating that the overall inflationary pressures are still significantly higher than they were a year ago.
On a month-to-month basis, the headline inflation rate for August 2024 was recorded at 2.22%, reflecting a marginal decrease from 2.28% in July 2024.
This means that while prices continued to rise, the rate at which they increased slowed slightly between July and August.
The National Bureau of Statistics (NBS) is expected to release the Consumer Price Index (CPI) report for September on Tuesday, October 15, 2024.
