Nigeria’s headline inflation up 20bps m/m to 34.8% in December 2024

Nigeria's headline inflation rate increased by 20 basis points month-on-month to reach 34.8 per cent in December 2024, according to data released by the National Bureau of Statistics. This surge in inflation was primarily driven by price hikes in energy and staple foods, along with higher holiday spending. Food inflation, in particular, spiked to 39.84 per cent, adding to the economic pressure faced by consumers. The sharp rise in inflation comes at a time when markets are eagerly anticipating U.S. inflation data, seeking insights into the Federal Reserve's interest rate strategy. To delve deeper into the implications of these numbers, Muda Yusuf, Director at the Center for the Promotion of Private Enterprises, shared his insights during a recent interview on CNBC Africa. Yusuf highlighted key concerns and offered recommendations to address the inflationary challenges facing Nigeria. Addressing the slight increase in inflation figures, Yusuf expressed his expectation of even higher inflation rates due to festive season demand pressures. While the 0.2 per cent uptick was lower than anticipated, he emphasized that inflationary pressures persist, warranting a strategic response from monetary and fiscal authorities. Yusuf underscored the limitations of monetary policy instruments in managing inflation effectively, advocating for a holistic approach that places greater emphasis on fiscal measures to curb inflation. He cautioned against an overemphasis on revenue generation that could inadvertently escalate production costs for businesses, urging policymakers to strike a balance for sustainable economic stability. Reflecting on the ongoing rebasing of the GDP and consumer price index (CPI), Yusuf shared his reservations about the reduced weighting of food in the CPI basket. He highlighted the significance of including new indexes such as services, energy, and farm produce to better align with the evolving economic landscape. Despite expectations of a stable macroeconomic environment in 2025, Yusuf voiced concerns over persistently high food and energy prices impacting the average Nigerian. He emphasized the need for prudent management of energy costs and proactive measures to mitigate potential inflationary shocks stemming from global oil price fluctuations. Additionally, Yusuf cautioned against overlooking the adverse effect of rising oil prices on businesses, despite the fiscal gains for the government. As Nigeria navigates the complex interplay of inflation dynamics and economic challenges, stakeholders are tasked with implementing targeted strategies to safeguard consumers, promote sustainable growth, and foster a resilient economy in the face of evolving global trends.