The relative stability of the naira in December, along with the federal government’s introduction of a 150-day import duty waiver on essential staples, has slowed imported food inflation to its lowest level since September 2019.
Headline inflation in Nigeria, however, continued its upward climb for the fourth consecutive month, reaching 34.8% in December 2024. Despite this, the pace of increase moderated for the second straight month, reflecting the impact of the Central Bank of Nigeria’s tight monetary policies.
Analysts at FBNQuest Capital Research noted that imported inflation eased to 41.29% year-on-year from 42.29% in November, its first slowdown in over four years. They attributed the deceleration to reduced naira volatility, the high cost of foreign exchange discouraging imports, and the duty waiver on essential food items.
The naira’s recent stability has been linked to the successful implementation of the Electronic Foreign Exchange Matching System (EFEMS), introduced in December 2023. The local currency appreciated by N125 to the dollar within a month of EFEMS adoption, signaling the potential for continued recovery.
In efforts to address soaring food inflation, the Nigerian government introduced measures, including the now-concluded duty waiver program, which aimed to reduce the cost of essential imports. While the initiative fell short of achieving its full impact, it helped improve food supply, highlighted by the arrival of 32,000 tons of rice from Thailand—the first such shipment in a decade.
Meanwhile, food inflation saw a slight decline, easing to 39.84% in December from 39.93% in November, according to the National Bureau of Statistics. The reduction was driven by price drops in bread, cereals, soft drinks, local beer, yams, potatoes, and other tubers.
The NBS is set to rebase Nigeria’s Consumer Price Index (CPI) by the end of January 2025, shifting the base year from 2009 to 2024. The revised methodology is expected to adjust the weight of key components like food and energy, potentially reducing their impact on the overall inflation rate.
Looking ahead, analysts at CardinalStone project a decline in inflation for January 2025, citing factors such as naira stability, the high base effect from 2024, and lower petrol prices. They anticipate inflation to ease to 34.52%, supported by foreign exchange reserves, increased portfolio inflows, and the efficiency of the EFEMS platform.
Although inflation remains a pressing concern, efforts to stabilize the currency, enhance food supply, and adopt new methodologies may offer some relief in the months to come.
