What will drive Nigeria's inflation in 2023?

Jan 06, 2023|Gbemisola Alonge

Most seasoned analysts in Nigeria might scoff at Nigeria’s current inflation numbers. In a nutshell, there is a widespread belief that Nigeria’s inflation is much higher than official reports. The concerns are valid, given that the inflation basket contains goods we don’t consume as much anymore.


Key Takeaways:

  • Inflation erodes purchasing power. In 2022 alone, the World Bank estimates that 5 million Nigerians were pushed into poverty.

  • Both the International Monetary Fund (IMF) and World Bank expect inflation numbers to decline in 2023. However, global factors and 2023 being an election year suggest otherwise.

  • The main drivers of inflation include spikes in food prices, the CBN’s monetary policy actions, government spending and most importantly, consumer expectation of higher prices.


But this article is not about proving or disproving officially-reported inflation numbers.

The focus is on what we expect Nigeria’s inflation story to be in 2023. This is important to consider as 2022 was a record year for inflation, not just in Nigeria but abroad as well. The US experienced its highest inflation in 40 years, while the UK’s was the highest in 41 years. In Nigeria, the pace of accelerating prices was slower compared to other countries. Headline inflation for November 2022 was 21.5%, the highest in 25 years. That’s still a record, given Nigeria has had long-standing double-digit inflation even in the face of sluggish economic growth. 

This leaves little room for income to catch up, so Nigerians have less to spend on goods and services they typically need for survival. The World Bank estimates that five million Nigerians were pushed into poverty due to inflation in 2022 alone, after pushing eight million people into poverty the year prior. But the impact doesn't stop at the consumer stage; it affects the entire economy. When people have less to spend, businesses suffer, and so does the government because there's less money for taxes. 

So what should businesses and individuals expect Nigeria’s inflation to look like this year?

2023 looks just like 2022

The International Monetary Fund’s (IMF) inflation forecast (going by 2020 inflation numbers) was that inflation would increase in 2021 and 2022 (reaching about 18%) but start to decline in 2023 (to around 17%). Going by the actual numbers, inflation indeed increased in 2021 (to an average of 17%, although it was as high as 18%) and in 2022 (to about 21.5% today), much higher than the IMF anticipated. 

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