Inflation surged to 21.82 % in January 2023 as Nigeria grappled with persistent fuel shortages and a naira crisis. The National Bureau of Statistics (NBS) reported that this rate is 0.48 percentage points higher than the 21.34 % recorded in December 2022. The rise was driven by higher prices for food items such as bread, cereals, potatoes, yam, other tubers, vegetables, meat, and rent. December 2022 marked the first easing of inflation after 11 consecutive months of increases; the year began with a 15.60 % rate in January and ended at 21.34 %. The NBS attributed 2022’s inflation to disrupted food supplies, higher import costs from naira depreciation, and a general rise in production costs. Compared with January 2022’s 15.60 %, the January 2023 rate represents a 6.22‑point increase. Inflation had already hit a 17‑year high of 19.64 % in July 2022 and has since risen further.
The NBS’s Consumer Price Index for January 2023 noted that headline inflation rose to 21.82 % from 21.34 % in December, a 0.47‑point monthly increase and a 6.22‑point year‑on‑year rise. Urban inflation reached 22.55 % while rural inflation was 21.13 %. Food inflation climbed to 24.32 % due to price hikes in bread, cereals, oil and fat, potatoes, yam, other tubers, fish, vegetables, fruits, meat, and other food products. These increases occurred despite the Central Bank of Nigeria’s (CBN) tightening monetary policies, which included raising interest rates and implementing a naira redesign to curb cash circulation and inflation. The CBN has lifted the policy rate from 11.5 % to 17.5 % over several months. Governor Godwin Emefiele said the Monetary Policy Committee will keep raising rates until inflation falls significantly, targeting a reduction below 15 % and eventually to 12 %. Inflation last fell below 15 % in November 2020, when it stood at 14.89 %.
Emefiele also emphasized that the naira redesign is expected to induce deflation by reducing cash held outside banks, thereby slowing money circulation and inflation. However, the scarcity of cash has caused hardship for many Nigerians in the informal sector and sparked protests. Persistent petrol shortages at the end of 2022 and early 2023 further pressured prices.
The private sector attributes the inflation surge to fuel and cash scarcity. Gabriel Idahosa, Vice President of the Lagos Chamber of Commerce and Industry (LCCI), described the rise as a ripple effect of fuel scarcity and the cashless push, noting that higher transport costs are passed on to consumers, eroding purchasing power. He predicts a temporary dip in inflation by the end of February as the cash‑swap programme concludes, followed by a rise in March when banks release funds and spending resumes. Prof. Adebayo Adams, Chairman of the Nigerian Association of Small and Medium Enterprises, echoed the expectation, citing fuel scarcity and naira scarcity as drivers of higher prices for goods and services. Segun Kuti‑George, National Vice‑Chairman of the Nigerian Association of Small‑Scale Industrialists, highlighted the premium Nigerians pay for cash, which translates into higher product prices.
Economists warned that sustained inflation could damage businesses and economic activity, though some expect a short‑term decline in February due to cash circulation disruptions. Sheriffdeen Tella, Professor of Economics at Olabisi Onabanjo University, linked the inflation rise to high food and energy prices and the CBN’s higher monetary policy rate, noting that rising borrowing costs and electricity prices increase production costs, making it difficult for firms to lower prices. Rotimi Fakayejo, a financial expert and stockbroker, considered the 0.47‑point monthly increase negligible but cautioned that if fuel scarcity persists, inflation could rise sharply in February. He stressed that cash scarcity hampers sales in Nigeria’s cash‑based economy and called for increased cash and fuel supply.
John Chukwu, CEO of Cowry Asset Management, described the December 2022 dip as an anomaly and predicted higher inflation in January and February due to ongoing economic disruptions, which would further erode purchasing power and living standards. David Adonri of Highcap Securities warned that rising inflation spells disaster for businesses and households.
The International Monetary Fund (IMF) identified elevated international food prices, large parallel‑market premiums, and monetary policy accommodation as key inflation drivers. In its Article IV consultation, the IMF urged the CBN to continue tightening policy until inflation eases, recommending further rate hikes, full sterilisation of central‑bank financing of fiscal deficits, and phasing out credit‑intervention programmes. The World Bank’s lead economist for Nigeria, Alex Sienaert, reported that the minimum wage lost 55 % of its value between 2019 and 2022, falling from N30,000 to N19,355, and that five million Nigerians fell into poverty between January and October 2022.
Comments are closed for this story.