As a result of the increasing cost of everything from food to petrol to rent, Nigeria's inflation rate rose in July to its highest level in over 18 years.
The National Bureau of Statistics (NBS) revealed data on Tuesday revealing the headline inflation rate increased to 24.08 percent from 22.79 percent in June, marking the seventh consecutive month of growth.
According to a July World Bank report, inflation brought an additional four million Nigerians into poverty in the first five months of this year.
Following housing water, electricity, gas, and other fuel (4.03 percent), clothing and footwear (1.84 percent), transport (1.57 percent), furnishings and household equipment and maintenance (1.21 percent), education (0.95 percent), food and non-alcoholic beverages contributed the most (12.47 percent) to the increase in the headline index.
Others include health (0.72%), other goods and services (0.40%), lodging and dining (0.29%), alcoholic drinks, cigarettes, and drugs (0.26%), leisure and culture (0.17%), and communication (0.16%).
According to David Omojomolo, Africa economist at London-based Capital Economics, "Nigeria's inflation rate rose again to an almost 18-year high of 24.1 percent, as the removal of fuel subsidies and the devaluation of the naira continue to push up prices."
He added that the Central Bank of Nigeria (CBN) will need to respond with more monetary tightening because the firm's concerns about the data quality were not allayed by the recent increase in inflation.
Petrol prices nearly quadrupled to N617 per litre since President Bola Tinubu announced on May 29 that the fuel subsidy was being eliminated, but the value of the naira has fallen since the currency was floated.
The official exchange rate for the naira jumped due to the floating of the currency from N463.38/$ to N744.41/$ as of Monday, while the parallel market rate was N945/$.
Demola Balogun, a mechanic in Lagos, said, "It is getting harder every day for Nigerians, especially with the recent removal of petrol subsidies and other reforms the Tinubu's led-government has done."
Inflation in food, which accounts for 50% of overall inflation, increased to 26.98% in July from 25.25% in June. Additionally, the rate of food inflation was 4.97 percentage points higher than the rate observed in July of last year (22.02 percent).
According to the NBS, price rises in oil and fat, bread and cereals, fish, potatoes, yams, and other tubers, fruits, meat, vegetables, milk, cheese, and eggs were the main contributors to the rise in food inflation.
Compared to the 16.06 percent reported in July 2022, core inflation, which excludes the prices of erratic agricultural products, increased by 4.41 percent to 20.47 percent in July.
The nation's high inflation rate, according to Israel Odubola, a research economist based in Lagos, portends major peril for the economy because it will have an impact on all economic agents, including investors, enterprises, and families.
"For households, it suggests they are shelling out more money to buy necessities like food and shelter. This implies that more money would be set aside for necessary expenses, leaving them with less money for savings or investments. Additionally, it raises the possibility of Nigeria's poverty getting worse, the speaker continued.
According to Odubola, firms' operational costs rise as a result of persistently rising inflation, and if costs are not adequately handled, their profitability may suffer.
The international lender further stated that in the short term, the elimination of the gasoline subsidy had increased prices, which had a negative impact on Nigerian households that were struggling financially.
Without compensation, an additional 7.1 million people will be forced into poverty. "The poor and economically insecure households will face an equivalent income loss of N5,700 per month."
The nation's soaring inflation last year caused household consumer expenditure to drop to its lowest level in six years. According to NBS data, household consumption spending decreased by 4.07 percent in 2022 as opposed to growing by 25.65 percent in 2021.
This has reduced savings and incomes and led the CBN to raise the nation's benchmark interest rate, also known as the Monetary Policy Rate (MPR), eight times in a row in an effort to stop the country's spiraling inflation.