Nigerians, businesses groan under hyper inflation rate of 24.08% in July 2023 pushed subsidy removal

Nigerians whether PDP, APC or labour party are groaning under hyper inflation that has surged to 24.08 per cent in the month of July 2023, a 129 basis-point increase compared to 22.79% recorded in June. This rise represents the sixth consecutive increase in the headline index this year and  highest since September 2005. The food inflation sub-component rose 173bps to 27.0% y/y, while the core inflation sub-component (which has been redefined by the NBS as ‘All items less farm produces and energy’ after PMS subsidy removal rose to 20.5 per cent y/y from 20.1 per cent. On a m/m basis, headline, food, and core inflation rates rose to 2.9 per cent, 3.5 per cent and 2.1 per cent compared to 2.1 per cent, 2.4 per cent and 1.7 per cent respectively the prior month. 

The causes for the persistent increase in food prices are no news, given that no known measures have been effectively executed to mitigate the ongoing insecurity and displacement issues in the North. The Northern Green Harvest with its anticipated food distribution, also already hindered by high transportation costs, faced other impediments like flooding due to the ongoing rainy season. Meanwhile, imported food costs continue to accelerate with foreign exchange rates at N788/$ at the I&E FX window – now Nigerian Foreign Exchange Market (NFEM), and N870/$ in the Parallel Market as of July 2023. The phenomenon rise in inflation is contained in the Consumer Price Index (CPI) report for July 2023 by the National Bureau of Statistics (NBS). The significant jump is following the complete removal of petrol subsidies and the unification/devaluation of the official exchange rate. Notably, on a month-on-month basis, the headline inflation rate stood at 2.89% in July which was 0.76% higher than the rate recorded in June 2023 (2.13%). 

The NBS report said that in terms of contribution to the year-on-year inflation, Food and non-alcoholic beverages (12.47%) contributed the most, followed by housing water, electricity, gas and other fuel (4.03%), and clothing and footwear (1.84%). The Food inflation rate rose to 26.98% in July 2023, representing a 1.73% point increase from 25.25% recorded in the previous month and 4.97% points higher than 22.02% recorded in the corresponding period of 2022. On a month-on-month basis, the Food inflation rate in July 2023 was 3.45%, this was 1.06% higher compared to the rate recorded in June 2023 (2.4%).  The average annual rate of Food inflation for the twelve-month ending July 2023 over the previous twelve-month average was 24.46%, which was a 5.71% points increase from the average annual rate of change recorded in July 2022 (18.75%). The rise in Food inflation on a year-on-year basis was caused by increases in prices of oil and fat, bread and cereals, fish, potatoes, yam and other tubers, fruits, meat, vegetable, milk, cheese, and eggs. 

According to the report “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 20.47% in July 2023 on a year-on-year basis; up by 4.41% when compared to the 16.06% recorded in July 2022. On a month-on-month basis, the Core inflation rate was 2.11% in July 2023. It stood at 1.77% in June 2023, up by 0.34%.  The average twelve-month annual inflation rate was 18.84% for the twelve-month ending July 2023; this was 4.31% points higher than the 14.53% recorded in July 2022. The highest increases were recorded in prices of passenger transport by air, passenger transport by road, vehicle spare parts, medical services, maintenance, and repair of personal transport equipment.

According to NBS in July 2023, all items inflation rate on a year-on-year basis was highest in Kogi (28.45%), Lagos (27.30%), Ondo (26.83%), while Borno (20.71%), Jigawa (20.85%) and Sokoto (20.92%) recorded the slowest rise in headline inflation on a year-on-year basis. On a month-on-month basis, however, July 2023 recorded the highest increases in Kogi (4.99%), Abia (4.12%), Akwa Ibom (4.07%), while Jigawa (0.16%), Taraba (1.09%) and Yobe (1.10%) recorded the slowest rise on month-on-month inflation. In terms of food inflation, Kogi State recorded the highest at 34.53% in the review month, followed by Lagos (32.52%), and Bayelsa (31.31%), while Jigawa (20.90%), Sokoto (21.63%) and Kebbi (22.45%) recorded the slowest rise in Food inflation. The NBS said last month that the inflation data for the month of June might not entirely reflect the effects stemming from the removal of fuel subsidies and the unification of the exchange rate. This came in response to apprehensions voiced by analysts and the Nigerian populace, suggesting that the inflation statistics for Nigeria might be presenting a less comprehensive picture.