The Organised Private Sector (OPS) has raised concerns about the persistent increase in Nigeria’s inflation rate, warning that it will further drive up the cost of production, raw materials, logistics, and machinery. This, in turn, could negatively impact businesses and the broader economy.
Inflation Trends and Current Statistics
The National Bureau of Statistics (NBS) reported on Wednesday that Nigeria’s inflation rate rose to 34.80% in December 2024, slightly higher than the 34.60% recorded in November. This marginal increase of 0.20% was attributed to heightened demand for goods and services during the festive season.
Compared to the same period in 2023, the December inflation rate marked a significant year-on-year increase of 5.87 percentage points from 28.92%, driven by economic challenges such as currency depreciation, high energy costs, and persistent supply chain disruptions.
The average inflation rate for the 12 months ending December 2024 stood at 33.24%, a substantial rise from 24.66% in 2023.
Key Contributors to Inflation
The NBS report identified food and non-alcoholic beverages as the primary drivers of inflation, contributing 18.02% to the overall figure.
Other notable contributors included:
- Housing, water, electricity, gas, and other fuels: 5.82%
- Transport: 2.26%
- Health and communication sectors: 1.05% and 0.24%, respectively
Urban vs. Rural Inflation
Urban inflation rates surpassed rural rates, with urban inflation reaching 37.29% year-on-year in December 2024, compared to 31.00% in December 2023. However, on a month-on-month basis, urban inflation saw a slight decline to 2.56% from 2.77% in November.
Rural inflation rose to 32.47% year-on-year in December 2024, compared to 27.10% in December 2023, with month-on-month inflation easing to 2.32% from 2.51% in November.
Private Sector Reactions
Higher Production Costs and Business Closures
Segun Kuti-George, National Vice President of the Nigerian Association of Small-Scale Industrialists, noted that rising inflation directly increases production costs, making locally manufactured goods less competitive.
“The cost of raw materials, logistics, machinery, and other inputs will continue to rise, making locally produced goods more expensive. This may reduce consumers’ purchasing power and lead to higher inventory levels. If imported goods remain cheaper, it could result in more business closures,” Kuti-George warned.
He also expressed frustration over the ineffectiveness of monetary policy rate hikes in curbing inflation.
Impact on Investments and Economic Growth
Femi Egbesola, National President of the Association of Small Business Owners of Nigeria, highlighted how inflation has eroded consumer purchasing power, reduced profitability, and made Nigerian businesses less attractive to investors.
“Rising inflation has also led to reduced exports, increased unemployment, and diminished national income, further worsening poverty levels,” Egbesola stated.
Cost-Push Inflation Challenges
Olusola Obadimu, Director-General of the Nigeria Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), emphasized that current inflation is primarily cost-push, driven by rising production costs.
“Increasing monetary policy rates won’t work in this situation. Instead, we must address input costs to stabilize prices,” Obadimu said. He advocated for fiscal discipline, infrastructure development, and policies to enhance local business competitiveness.
Recommendations for Inflation Control
Centre for Promotion of Private Enterprise (CPPE)
Dr. Muda Yusuf, Director of CPPE, called for a pause on further monetary policy rate hikes, citing their limited effectiveness in addressing Nigeria’s inflation challenges.
“Excessive pressure on ministries, departments, and agencies (MDAs) to boost revenue has inflationary implications, as these costs are passed on to investors through higher fees, levies, and import duties,” Yusuf said.
He urged the government to balance revenue generation with investment promotion and inflation control, suggesting revenue targets should be based on empirical studies and the economy’s absorptive capacity.
Fiscal Discipline and Infrastructure Development
Both NACCIMA and CPPE emphasized the importance of improving infrastructure, reducing governance costs, and fostering a business-friendly environment to encourage investment and economic growth.
“By focusing on infrastructure and reducing fiscal waste, we can create an enabling environment for startups and business expansion, which will generate employment and increase tax revenue,” Obadimu concluded.
Conclusion
The continuous rise in inflation poses significant challenges to Nigeria’s private sector and overall economic stability. Stakeholders have called for strategic interventions, including addressing production costs, improving infrastructure, and adopting fiscally responsible policies. These measures are essential to stabilize prices, boost investor confidence, and ensure sustainable economic growth.
