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In July 2023, Nigeria saw a rise in headline inflation to 24.08%, an increase from June’s 22.79%. This marks the seventh consecutive monthly increase and the highest rate in the past 18 years, largely due to elevated food and core inflation. Food inflation surged by 26.98%, while core inflation was up by 4.41%. The surge in inflation rates is primarily due to increased logistics costs and the Naira’s depreciation, driving up food prices.


#1 Loosening of Money Supply

Although the CBN has tightened its monetary stance, there has been a loosening of money supply, which has grown by 15.85% in June 2023 to N64.33trn. This could lead to a further increase in inflation if the money supply outpaces the real output of the economy.

#2 Removal of Fuel Subsidy and Increase in VAT

The recent removal of fuel subsidy and increase in VAT on imported diesel have had a significant impact on the prices of domestic food, energy, and transportation costs. This has led to rising fuel prices in the transportation industry, resulting in increased fares for commuters. The price of diesel, which is mostly used by trucks for food distribution and logistics, has also surged by 18.06% to N850/litre due to naira depreciation and the 7.5% VAT.

#3 Devaluation of Naira

The devaluation of the naira is a top driver of inflation as it leads to higher import costs that ripple through the economy and affect production costs and other supply chain dynamics. This has resulted in elevated costs for machinery, fertilizers, and other inputs for farmers, which can result in higher food prices. The manufacturing sector is also grappling with increased expenses for raw materials, leading to elevated production costs.

#4 Higher Global Crude Oil Prices

Higher global crude oil prices due to supply cuts from major oil producing countries coupled with the depreciation of the naira has had a compounded impact on fuel prices. Oil prices have gone up by 16%, trading as high as $85pb, while the naira has seen a drop in value to as low as N955/dollar. There would likely be a further increase in the pump price of petrol as the landing cost of petrol climbs on the back of adjusted import duty.



The impact of this inflation is being felt by everyone in Nigeria. Consumers are facing higher costs for imported commodities and increased transportation costs, which are leading to lower levels of consumption and social unrest. This is particularly challenging for those on low incomes, who are struggling to make ends meet in the face of rising prices.

Higher cost of food, transport and energy prices would trigger social unrest and lead to demand of higher wages. Changes in consumer behaviour is expected in the local markets as there would be a trend of consumer resistance and switching to substitutes as the purchasing power of consumers become more eroded.


Businesses are also feeling the pressure, as they face increased expenses on fuel and production costs. This may lead to price resistance and a squeeze on profit margins, which could have serious implications for the wider economy.

With the likelihood of income and substitution effect of price changes, we anticipate the dynamics of price elasticity to play out in the demand for certain products.



With inflation now at 24.08% and a saving rate of 5.62% (30% of 18.75% MPR), savers lose 18.46% per annum on their savings.Consumers would find it difficult to save as their savings culture is dampened by lower disposable income and negative return on savings.

Savers may feel compelled to seek higher-yield investment options to offset the effects of inflation. Fixed income earners such as pensioners would face peculiar challenges as the cost-of-living rises.

Action needs to be taken to address the root causes of this inflation, and to mitigate its impact on the wider economy. Measures such as tighter fiscal policy, greater investment in infrastructure, and improved regulation of the financial sector could all help to reduce inflation and support economic growth in Nigeria.