Earlier, we discussed how rising inflation was a ticking timebomb and growing threat to Nigeria’s fragile economic outlook.
At 17.71%, the country’s annual inflation rate is certainly on a rise thanks to soaring food and diesel prices. This month it was reported that the main ingredient for making Akara jumped a whopping 32% in May while the price of peanut oil surged 47% in the same period. Such a development is bad news and could make this breakfast snack unaffordable for some.
The inflation beast has now set its sights on transportation fares despite the billions of dollars pumped into fuel subsidies to cap prices and cool public dissatisfaction over the higher cost of living. In an unfavourable development, the average cost of transportation has increased 46% to 582 naira a trip in May compared with a year earlier. Given how prices have jumped despite Nigeria spending a whopping 1.49 trillion Naira subsidising gasoline in the first four months of 2022, things could get messy as inflation takes no prisoners. Global oil prices surged to multi-year highs thanks to geopolitical risks but Nigeria has been unable to cash in due to poor infrastructure, low production, and fuel subsidies.
This horrible combination places the economy under threat with rising inflationary pressures potentially leading to higher interest rates from the Central Bank of Nigeria.
Lukman Otunuga is a Senior Research Analyst at FXTM