High petrol price pushes inflation to 32.70% – Report

Nigeria’s headline inflation rate for September 2024 rose to 32.70 per cent after slowing consecutively in the previous two months of July and August.

This was according to the latest Consumer Price Index report from the National Bureau of Statistics.

The World Bank projected that Nigeria would experience a further rise in inflation rates in September 2024, largely driven by a significant hike in the price of petrol.

The latest inflation figure is a marginal increase of 0.55 per cent from the August 2024 figure of 32.15 per cent, reflecting ongoing price pressures across the country.
Year-on-year, inflation has surged by 5.98 percentage points compared to the 26.72 per cent recorded in September 2023.

The report read, “In September 2024, the Headline inflation rate was 32.70 per cet relative to the August 2024 headline inflation rate of 32.15 per cent. Looking at the movement, the September 2024 Headline inflation rate showed an increase of 0.55 per cent compared to the August 2024 Headline inflation rate.

“On a year-on-year basis, the headline inflation rate was 5.98 per cent points higher compared to the rate recorded in September 2023 (26.72 per cent). This shows that the Headline inflation rate (year-on-year basis) increased in September 2024 when compared to the same month in the preceding year (i.e., September 2023).
“Furthermore, on a month-on-month basis, the Headline inflation rate in September 2024 was 2.52 per cent, which was 0.30 per cent higher than the rate recorded in August 2024 (2.22 per cent). This means that in September 2024, the rate of increase in the average price level is higher than the rate of increase in the average price level in August 2024.”

The World Bank, in its Africa’s Pulse report released on Monday, projected that Nigeria would experience a further rise in inflation rates in September 2024, largely driven by a significant hike in gasoline prices.

The report noted that the government’s decision to implement market-based pricing, which initially tripled gasoline prices in May 2023, led to an additional 40-45 per cent rise in fuel costs in September 2024.

This development is expected to exacerbate inflationary pressures, with transportation and production costs rising sharply, leading to higher prices for goods and services across the country.

This rise in inflation follows a trend that began in June 2024, when headline inflation peaked, influenced heavily by increases in fuel prices and the subsequent rise in transportation and production costs.

The higher cost of fuel has had a ripple effect on various sectors, pushing up the prices of goods and services across the country.

The report read, “While the inflationary effects of a weakened naira in the first months of this year and the removal of the gasoline subsidy in the second half of 2023 appeared to be gradually subsiding, a further increase in gasoline prices by 40-45 percent in September may reverse the disinflationary trend. The consolidation of macroeconomic reforms should support higher growth in the country in 2025.”
The NBS report also noted that food prices remain a key driver of inflation, with the food inflation rate climbing to 37.77 per cent in September 2024, a notable rise of 7.13 per cent from the 30.64 per cent recorded in the same period last year.

The increase in food inflation is largely attributed to rising prices of staples such as rice, maize, beans, and yams. Month-on-month, the food inflation rate also increased to 2.64 per cent in September 2024, up from 2.37 per cent in August.

Inflation is more pronounced in urban areas than rural regions, with urban inflation rising to 35.13 per cent in September 2024, up from 28.68 per cent in the previous year. In rural areas, the inflation rate reached 30.49 per cent, compared to 24.94 per cent in September 2023. Month-on-month, urban inflation stood at 2.67 per cent, while rural inflation was recorded at 2.39 per cent.

Among the states, Bauchi recorded the highest year-on-year inflation rate at 44.83 per cent, followed by Sokoto (38.74 per cent) and Jigawa (38.39 per cent). Conversely, Delta (26.35 per cent), Benue (26.90 per cent), and Katsina (27.71 per cent) experienced the slowest inflation rise. On a month-on-month basis, Sokoto saw the sharpest increase at 4.63 per cent, with Taraba (4.07 per cent) and Anambra (3.74 per cent) also showing significant rises.

Core inflation, which excludes volatile agricultural products and energy prices, rose to 27.43 per cent in September 2024, a 5.59 per cent increase compared to the 21.84 per cent recorded in September 2023. Significant price increases were observed in housing rentals, transport, and medical services.
The rise in inflation occurred after a consecutive drop, which was triggered by a decrease in food prices following the harvest period in Nigeria.

The Monetary Policy Committee of the Central Bank of Nigeria last month voted to increase the monetary policy rate, which measures the benchmark interest rate, to 27.25 per cent.
This new rate, a move that stunned the financial markets, was an increase of 50 basis points from 26.75 per cent announced by the apex bank in July 2024.

Financial experts had expected that the CBN would either hold or lower interest rates following two consecutive months of declining headline inflation.

According to the CBN, the decision to raise interest rates was premised on recent events in the economy regarding inflation and the stability of the foreign exchange market.

The CBN Governor, Yemi Cardoso, mentioned the threats of food inflation, flooding in many parts of the country, and rising petrol and energy prices as reasons why further monetary policy tightening should be executed.

Some market analysts earlier said that factors such as the depreciation of the naira and the fuel prices would likely see inflationary trends re-emerge.

The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, during the firm’s recent Third Quarter Webinar Series, expressed concerns that there may be a re-emergence of the inflationary trend due to rising fuel prices, which impacts the services of goods and services.

Chukwu added that the effectiveness of the CBN’s tight monetary policy in curbing inflation remains uncertain, particularly in light of structural challenges such as inadequate infrastructure, high fuel costs, unreliable power supply, and logistical bottlenecks.
Commenting on the inflation figure on Tuesday, Dr Muda Yusuf, the Director of the Centre for the Promotion of Private Enterprise, expressed concerns over Nigeria’s resurgence of inflationary pressures, particularly after months of relative respite.

He said, “It is troubling that we are witnessing a resurgence of high inflationary pressures after some few months of respite despite policy measures to tame inflation, especially on the monetary side. Purchasing power had continued to plunge over the past few months. The situation had been further exacerbated by the surging petrol price.”

He attributed the increase in inflation to factors such as the rising cost of petrol, depreciation of the naira, and surging transportation and logistics costs.

He noted, “the reality is that the dynamics driving inflation are yet to be effectively subdued. These factors include the depreciating exchange rate, surging fuel price, rising transportation costs, logistics and supply chain challenges, high energy cost, climate change including resultant incidents of flooding,  insecurity in farming communities and structural bottlenecks to production.

“These are largely supply-side issues. There is also the factor of seasonality of agricultural outputs which activates seasonal price surge in some food crops. Elevated inflationary pressures escalate production costs, weakens profitability, and dampens investors’ confidence.”

Yusuf urged the government to provide concessionary import duties for industrialists and prioritise the resolution of critical issues like power supply, logistics, and foreign exchange.

Also, he highlighted the importance of sub-national governments in addressing food inflation by improving rural infrastructure to ease transportation and access to markets.
He concluded by expressing hope that the proposed economic stabilisation measures currently before the National Assembly could provide much-needed fiscal relief.

However, he warned that without concerted efforts to tackle these fundamental challenges, taming inflation would remain difficult.