BREAKING: Inflation rate closes 2023 at 28.92%, highest since 2003

The National Bureau of Statistics (NBS) on Monday revealed that inflation increased to 28.92 per cent in December 2023, gaining 7.58 percentage points from 21.34 per cent reported December 2022.

The reported 28.92 per cent is the highest since 2003 as Nigeria economy suffered effect of war between Russia and Ukraine, insecurity, among others.

In 2023, the push in inflation rate is largely due to the continued pressure on the food inflation sub-basket

The Consumer Price Index (CPI) reported by NBS disclosed that 28.92 per cent in December 2023 is relative to the November 2023 headline inflation rate which was 28.20per cent.

According to NBS, “Looking at the movement, the December 2023 headline inflation rate showed an increase of 0.72per cent points when compared to the November 2023 headline inflation rate.

“On a year-on-year basis, the headline inflation rate was 7.58percentage points higher compared to the rate recorded in December 2022, which was 21.34per cent.

“This shows that the headline inflation rate (year-on-year basis) increased in December 2023 when compared to the same month in the preceding year (i.e., December 2022).

“Furthermore, on a month-on-month basis, the headline inflation rate in December 2023 was 2.29 per cent, which was 0.20per cent higher than the rate recorded in November 2023 (2.09 per cent).

“This means that in December 2023, the rate of increase in the average price level is more than the rate of increase in the average price level in November 2023.”

NBS stated that the percentage change in the average CPI for the 12-month ending December 2023 over the average of the CPI for the previous twelve-month period was 24.66 per cent, showing a 5.81per cent increase compared to 18.85 per cent recorded in December 2022.

On urban inflation, the NBS report stated that, “On a year-on-year basis, in December 2023, the Urban inflation rate was 31.00 per cent, this was 8.98 percentage points higher compared to the 22.01 per cent recorded in December 2022.

“On a month-on-month basis, the Urban inflation rate was 2.42 per cent in December 2023, this was 0.19 per cent points higher compared to November 2023 (2.23 per cent).”

“The corresponding 12-month average for the Urban inflation rate was 26.22per cent in December 2023. This was 6.83percentage points higher com-pared to the 19.38per cent reported in December 2022.”

For rural Inflation, it said, “The Rural inflation rate in December 2023 was 27.10per cent on a year-on-year basis; this was 6.38 per cent higher compared to the 20.72 per cent recorded in December 2022. On a month-on-month basis, the Rural inflation rate in December 2023 was 2.17 per cent, up by 0.18percentage points compared to November 2023 (1.99per cent).

“The corresponding 12-month average for the Rural inflation rate in December 2023 was 23.25per cent. This was 4.91per cent higher compared to the 18.34per cent recorded in December 202.”

Based on our model output, we estimate that the headline rate would accelerate to 29.0% y/y in December, driven by the combined impact of festivity-induced high demand, currency pressure, and the uptick in transportation costs due partly to increase in energy goods prices.

Analysts at Afrinvest Research said, “Based on our previous forecast, we had projected a 2.90per cent and 2.2per cent m/ m farm and non-farm inflation prints which should crystalise to a headline inflation of 29.3per cent y/y and an annualised average of 24.6 per cent.

“However, our reassessment of the macroeconomic dynamics in December favours a less pessimistic case (29 per cent, annualised average: 24.5 per cent), given FG’s unanticipated interventions – free train ride and a 50 per cent discount on inter-state road transport fare during the peak of the yuletide. On the basis of the above, we estimate a softer m/m headline reading of 2.4 per cent as against 2.5 per cent in the earlier forecast.

“As per the food inflation sub-component, we estimate the yy reading to climb to 34.1 per cent (from 32.8 per cent), while the m/m reading should settle at 2.8 per cent. For the core inflation sub-basket, we estimate a y/y reading of 21.3 per cent and m/m print of 1.8 per cent compared to 22.6 per cent y/y and 1.6 per cent m/m in the preceding month.

Looking ahead into 2024, we project a modest decline in the average headline inflation rate (beginning from Q2) to 22.1 per cent in a blue-sky scenario. This, we believe, should be shaped by high base year impact, muted increase in energy prices, reduction in FX volatility, modest improvement in domestic food supply, and positive spillovers from decelerating global inflation trend.

“On the basis of this expectation, we hold that the CBN may guide the policy rate (MPR) higher in Q1 to 19 per cent before relaxing its hawkish posture from H2 depending on the trajectory of other key macroeconomic parameters and the direction of interest rates in major economies.”