Dear Subscriber,

After 10 consecutive months of increases, Nigeria’s headline inflation declined to 21.34% in December. The deceleration was in line with the FDC earlier projection, both nominally and directionally. The slowing rate of inflation was primarily due to an appreciation in the value of the naira in the parallel market by 6.27% in November and a decline in the price of diesel which dropped to N780 per litre. Other factors that helped the price level include the harvest season effect and end of the flood effect in November.

Even though headline inflation declined, a disturbing observation was the increase in core inflation, which is defined as inflation less seasonality. Therefore the underlying causative factors driving inflation are still present and lingering. It is too early to jump to the conclusion with one reading that inflation is at a point of inflection since a data point does not make a trend.

Consumers are still battling with high cost of living

Although the December inflation decelerated, the cost of living, no doubt, remains high. Inflation averaged 18.8% in 2022, the highest since 1992. The CPI has grown by around 82% since the last minimum wage of N30, 000 was announced. This implies that in naira terms, a consumer that received N30,000 today is only receiving a real income of N5,400 relative to the value of the same amount received in 2019. Also, in the past year, the price of rice, yams, and bread has increased by 27%, 70%, and 50%, respectively. This implies that consumers are living on edge. With stagnant wages and rising costs of living, deprivation and desperation are currently at an all-time high.

As inflation tapered in December and growth remains tepid, most analysts are betting that the MPC will become less hawkish when they meet later this month. With the general election scheduled to hold in less than 40 days amid rising uncertainty, the odds in favour of maintaining the status quo in the next MPC meeting are high.

Enjoy your read!