Economists Express Concern Over The Soaring Production Costs Amidst A Staggering Inflation Rate Of 22.79%

According to data released by the National Bureau of Statistics on Monday, Nigeria’s headline inflation rate has risen for the sixth consecutive time, reaching 22.79% in June 2023. This represents a new 17-year high, surpassing the previous month’s rate of 22.41%.

The report states that the June 2023 headline inflation rate increased by 0.38 percentage points compared to May 2023. On a year-on-year basis, the inflation rate was 4.19 percentage points higher than the rate recorded in June 2022, which was 18.60%.

The rising inflation figure was primarily driven by the cost of food and non-alcoholic beverages, which contributed significantly to the overall inflation rate.

Economists have emphasized the need for a holistic approach to tackling inflation. Professor Segun Ajibola, a former President and Chairman of the Institute of Chartered Institute of Bankers of Nigeria highlighted the importance of addressing fundamental issues related to production costs and agriculture.

Dr. Yemi Kale, Partner, and Chief Economist at KPMG Nigeria, acknowledged the positive net benefits of subsidy removal but warned about potential disruptions resulting from increased energy prices, inflation, and transportation fares. He pointed out that such disruptions indirectly impact food prices, consumer demand, and the operations of micro, small, and medium-sized enterprises, potentially leading to unemployment and insecurities.

KPMG Nigeria further projected that the removal of fuel subsidies could cause Nigeria’s inflation rate to rise significantly, potentially reaching 30% in June 2023. The report emphasized that the impact of subsidy removal and exchange rate unification on headline inflation may not be fully reflected in the June Consumer Price Index, as data collection for the reference month typically ends around the middle of the month.

The National Bureau of Statistics stated on its Twitter page that the full effect of the fuel subsidy removal and exchange rate unification on consumer prices would be observed not only in June but also in subsequent months, as actual prices collected across the country are taken into account.