Rising Inflation Dampens Nigerian Holiday Season Amid Economic Struggles

Nigerians are set to face a difficult holiday season as the country's headline and food inflation rates continue to rise under President Bola Ahmed Tinubu's administration.

According to a report by the National Bureau of Statistics (NBS) released on Monday, inflation surged to 34.60% in November, up by 0.72% month-over-month, while food inflation climbed from 39.19% to 39.93%. These figures reflect a substantial year-on-year increase from 28.20% for headline inflation and 32.84% for food inflation recorded in November 2022.

Economists and financial experts, including Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), and Prof. Segun Ajibola, former Chairman of the Council of Chartered Institute of Bankers, shared their concerns during separate conversations with DAILY POST.

Prof. Ajibola criticized the Central Bank of Nigeria's (CBN) monetary interventions, stating they have been largely ineffective in addressing the root causes of inflation. He emphasized that fiscal policies would offer better solutions to Nigeria's economic challenges.

“There is a wrong diagnosis of the inflationary problem in Nigeria. CBN is, therefore, applying wrong prescriptions. Solutions lie more in fiscal measures, not contractionary monetary stance,” Ajibola said.

He pointed out that Nigerians' purchasing power has eroded significantly and that the recently announced free train services by the Federal Government would have limited impact.

“Nothing meaningful. I am sure less than 1% of the Nigerian population has access to train services,” he added.

The Federal Government recently announced a two-week free train service as part of measures to cushion the effects of high transportation costs. Minister of Information and National Orientation, Mohammed Idris, made this known following Monday's Federal Executive Council meeting.

However, experts argue that while the initiative is commendable, it does not address the broader inflationary pressures caused by rising energy, production, and transportation costs.

Muda Yusuf of the CPPE echoed similar sentiments, noting the need for stronger fiscal measures such as tax breaks, subsidies, and tariff waivers to address Nigeria's inflation crisis.

“The persistent inflation pressures are very worrisome. The challenge the ordinary citizen faces is inflation's impact on welfare and purchasing power,” Yusuf said.

Both analysts stressed the importance of adopting comprehensive fiscal policies alongside monetary measures to reduce inflation effectively.

1. Address Production and Transportation Costs:
   Fiscal tools, such as tariff waivers and tax breaks, can help reduce the cost of production and ease inflationary pressure.

2. Improve Agricultural Sector:
   Insecurity affecting food production must be tackled to stabilize food supply and reduce inflation.

3. Sustainable Subsidies:
   Yusuf praised the free train services as a temporary relief but called for broader, targeted subsidies in transportation, agriculture, health, and education.

“It is good. It is a kind of subsidy we clamour for, but we want to see a sustainable subsidy, not a one-off. All over the world, there is government-subsidized transportation.”

He further urged the government to reduce energy costs, stabilize the exchange rate, and implement policies that ease the cost of doing business.

Under Olayemi Cardoso’s leadership, the Central Bank of Nigeria has consistently raised interest rates in response to inflation. Most recently, the CBN's Monetary Policy Committee voted to increase the interest rate to 27.50% in November. Despite this, analysts argue that raising rates has done little to stem inflationary pressures.