Nigeria’s inflation rate spiked to an 11-month record high in May 2022, hitting 17.71% and representing its fourth consecutive monthly rise in the year, with energy and food prices rising to record levels.
The world is currently battling with unprecedented levels of high inflation rates, triggered by the Russia-Ukraine crisis, which has caused a significant hike in energy prices and by consequence, a spike in the price of food and services.
While, Nigeria’s inflationary pressure cannot be isolated from the global energy crisis, food supply shocks, and global inflationary uptrend, Nigeria seems to be bearing the brunt of the spike in commodity prices.
The United Kingdom is currently dealing with a 40-year inflation rate of 9.1%, Germany’s inflation rate soared to 7.9% in May 2022, Ghana’s rate peaked at an 18-year high of 27%, all as a result of the global trend caused by bubbling crude oil prices, sanctions on Russia’s trade amongst others.
In the same vein, the trillions of dollars released into the global economy by world central banks in 2020, in order to curb the effect of the COVID-19 pandemic is still causing a ripple effect in the prices of goods and services as a result of excessive liquidity.
Meanwhile, central banks across the world have raised their interest rates to curb the rising inflation. The likes of USA, Canada, UK, Ghana, South Africa have all raised their interest rates to combat rising prices of goods and services.
Likewise, Nigeria’s Central bank followed suit with a 150 basis-point hike in its interest rate to 13%, the first hawkish move by the apex bank since July 2016. While the move is partly to curb the galloping pace of inflation rate, it is also geared at attracting foreign inflows into the economy to ensure the stability of the Nigerian exchange rate.
The International Monetary Fund (IMF) has projected Nigeria’s inflation to remain elevated, with high food prices raising food security concerns in the country. The Washington-based institution however projected a GDP growth of 3.4% year-on-year for 2022.
On the other hand, the Central Bank of Nigeria (CBN) attributed the rising inflation rate to a combination of persisting high food and energy prices, supply chain disruptions associated with the impact of sanctions against Russia, exchange rate pressure, capital flow reversals, as well as underlying legacy constraints.
High inflation basically erodes the purchasing power of the citizens and affects all areas of one’s spending. Below is a list of how inflation affects you: