Nigeria High Inflation Rate and the Rise of Food Costs

Nigerian inflation quickened to an almost three-year high in November as dollar shortages, insecurity in farming areas and supply bottlenecks stoked food prices.

Consumer prices rose 14.9% from a year earlier, compared with 14.2% in October, the Abuja-based National Bureau of Statistics said Tuesday in a report published on its website. That matched the median estimate of three economists surveyed by Bloomberg. Costs increased 1.6% in the month.

Key Insights

  • The food index, which accounts for more than half the inflation basket, rose 18.3%, compared with 17.4% in October. That is the highest rate since January 2018. Costs increased 2% in the month. That’s adding to the challenges of an economy in a recession that could push an extra 6.6 million Nigerians into poverty, according to World Bank estimates.
  • President Muhammadu Buhari’s order to restrict dollar access for food and fertilizer imports has driven traders to the parallel market for foreign exchange, where they pay a lot more. The move, aimed at boosting local production, has raised costs for importers and added to upward pressure on food prices. A slew of attacks on Nigeria farmers has pushed down food reserves, raising the price of key staples.
Nigeria Food Market
  • Annual inflation has been above the 9% top of the central bank’s target range since 2015. The rate could remain in double-digits unless authorities reform monetary policy to focus on price stability, the International Monetary Fund said last week. Extra interest-rate cuts after 200 basis points of easing this year are unlikely to give an additional boost to the economy, the lender said.
  • However, the central bank said at its November rates announcement, where it held borrowing costs, that the upcoming harvest and recovery in domestic production should ease food inflation. Nigeria will also open its land borders “very soon,” Finance Minister Zainab Ahmed said last month, raising hopes that the blockades that have been in place for more than a year and added to supply constraints, may be lifted at some point.

By Alonso Soto — With assistance by Simbarashe Gumbo, and Anthony Osae-Brown

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