Nigeria’s inflation rate surged to 34.80% in December 2024, marking a slight increase from 34.60% recorded in November, according to the National Bureau of Statistics (NBS). This rise, attributed to increased demand during the festive season, continues to exacerbate economic pressures, drawing concern from the Organised Private Sector (OPS) over its impact on production costs, consumer spending, and overall business sustainability.
Inflation Trends and Contributing Factors
On a year-on-year basis, the December inflation rate increased significantly by 5.87 percentage points compared to 28.92% recorded in December 2023. The NBS report highlighted persistent economic challenges, including currency depreciation, high energy costs, and ongoing supply chain disruptions, as key drivers of inflation.
Food and non-alcoholic beverages emerged as the largest contributors, accounting for 18.02% of the inflation rate, followed by housing, water, electricity, gas, and other fuels at 5.82%, and transport at 2.26%. Urban areas experienced higher inflation rates than rural regions, with urban inflation standing at 37.29% year-on-year, up from 31.00% in December 2023. Rural inflation also rose to 32.47%, compared to 27.10% in the same period last year.
Food inflation continued its upward trajectory, reaching 39.84% year-on-year, driven by rising costs of staples such as rice, maize, yams, and dried fish. Month-on-month, however, food inflation eased slightly to 2.66% from 2.98% in November due to reduced prices for items like local beer, soft drinks, and tubers.
Core inflation, which excludes volatile agricultural and energy products, climbed to 29.28% in December, up from 23.06% in December 2023. Sharp increases were observed in transport fares, meals at local restaurants, and personal grooming services.
Private Sector Reactions
The OPS has voiced concerns about the inflationary trend, highlighting its adverse effects on businesses and the broader economy.
Segun Kuti-George, Vice President of the Nigerian Association of Small-Scale Industrialists, noted that rising costs of raw materials, logistics, and machinery are pushing up production costs. He warned that higher prices for locally manufactured goods could lead to reduced consumer demand, increased inventory levels, and a shift toward cheaper imported products, which could force more businesses to shut down.
Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria, emphasized that inflation has eroded consumers’ purchasing power, increased production costs, and reduced profitability. He added that this has made Nigerian businesses less competitive globally, reduced export volumes, and contributed to economic stagnation, rising unemployment, and poverty.
The Director-General of the Nigeria Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Olusola Obadimu, attributed the inflation hike to cost-push factors, including rising input costs. He argued that continuous monetary policy rate (MPR) hikes by the Central Bank of Nigeria (CBN) would not effectively address inflation under current economic conditions.
Recommendations for Policy Action
Economic experts and industry leaders have called for targeted reforms to address the root causes of inflation.
Dr. Muda Yusuf, Director of the Centre for Promotion of Private Enterprise, advised pausing further MPR hikes to reduce business operating costs. He urged the government to focus on reducing public sector debt and implementing fiscal discipline to lower inflationary pressures.
Yusuf also criticized the arbitrary revenue targets imposed on government ministries and agencies, warning that these measures often translate into higher costs for businesses through increased fees, levies, and regulatory charges. He recommended revenue targets based on empirical research and consideration of the economy’s absorptive capacity.
NACCIMA highlighted the importance of enhancing local business competitiveness by addressing infrastructural deficits and fostering a conducive environment for startups and business growth. Obadimu stressed that such measures are crucial for job creation, boosting exports, and generating tax revenue.
Outlook for 2025
Despite current challenges, economic analysts expressed cautious optimism for 2025, citing potential improvements in exchange rate stability, foreign reserves, and easing geopolitical tensions. The inflation outlook may also benefit from a base effect following high inflationary pressures in 2024.
Experts, however, emphasize the need for coordinated fiscal and monetary policies to ensure sustainable economic growth, tackle inflation effectively, and protect businesses from further economic shocks.
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