Nigeria’s inflation rate has been described as a complex case of stagflation by Development Economist, Professor Ken Ife. According to Professor Ife, the country is experiencing a rare economic condition where multiple forms of inflation occur simultaneously, making economic recovery difficult. This comes as Nigeria’s inflation rate fell for the sixth month in a row to 18.02 percent in September, its lowest level in over three years.

Professor Ife explained that Nigeria is experiencing all four types of inflation at the same time, including demand-pull inflation, cost-push inflation, imported inflation, and inflation driven by regional food demand and currency devaluation. Demand-pull inflation is driven by excess liquidity and massive cash flow chasing fewer goods and services. The country’s monetary authorities have been trying to reduce liquidity through inflation-targeting policies, but the challenge persists due to the money in circulation not being backed by productivity gains.

Cost-push inflation, on the other hand, is linked to the rising cost of transportation, energy, and insecurity, which affects the production and distribution of goods, particularly food. Imported inflation is another major driver, with Nigeria’s heavy dependence on imports making it vulnerable to global disruptions like the COVID-19 pandemic and the Russia-Ukraine crisis. The fourth factor, which is rarely discussed, stems from regional food demand and currency devaluation, with Nigeria’s food exports to neighboring countries worsening domestic food inflation due to exchange rate differentials.

Professor Ife noted that Nigeria’s food exports to countries like Niger, Chad, and Mali have worsened domestic food inflation, with traders making up to 200 percent profit and putting more pressure on domestic food prices. While Nigeria has seen a slight drop in food inflation recently due to increased imports, the underlying structural issues of production, currency weakness, and import dependence remain unresolved, making inflation a persistent challenge for policymakers.

The complex nature of Nigeria’s inflation rate highlights the need for policymakers to address the underlying structural issues driving inflation. With the country’s inflation rate remaining high, despite a slight drop, it is essential for the government to implement policies that promote productivity gains, reduce dependence on imports, and strengthen the currency. This will help to alleviate the pressure on domestic food prices and mitigate the effects of inflation on the economy.