Nigeria's Economy Under Strain As Inflation Rate Rises


Tuesday, March 17, 2020/    6:00PM/ Adesola Borokinni, Proshare Research/ Image Header Credit: NBS

Latest inflation figures from National Bureau of Statistics (NBS) reveals an increase in inflation to +12.20% in the month of February. The inflation figures have been upward trending, the highest in the past 21 months since Nigeria closed its borders in August 2019 (see Chart 1 below).

Chart 1: Nigeria's Inflation rate (%)

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Source: NBS, Proshare Research

There was also a rise in food inflation from +14.85% in January to +14.90% in February 2020. Oil and fats, fish, vegetables, meat, bread and cereals recorded the highest increases in price (see Chart 2 below)

Chart 2: Food Inflation rate (%)

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Source: NBS, Proshare Research


The spread of the coronavirus has led to the disruption of global supply chains. The Nigerian economy which is an import dependent nation is susceptible to external shocks. Recent data released by NBS reveals that about 73.13% of manufactured goods were imported in Q4 2019 (see Table 1). With the disruption in global supply chains and the continuous closure of the border it is projected that Nigeria inflation rate will rise in coming months.

Table 1: Nigeria's Sectors % Share of Total Imports


Q4 2019

% Share of Total Imports

Agricultural Goods



Raw Materials Goods



Solid Mineral Goods



Energy Goods



Manufactured Goods



Crude Oil



Other Petroleum Oil products






Source:  NBS, Proshare Research

A Cause for Concern

Economic experts are urging policy makers to embark on a more pragmatic approach to calm the nerves of investors and its citizens as Nigeria's inflation has continuously recorded an increase accompanied with the recent disruption in global supply chains.

In its report released on March 16th, 2020 the CBN outlined its policy measures in response to COVID-19 outbreak and spill-over effect, one of its policies includes increasing liquidity in the economy by strengthening its LDR policy and creation of N50bn targeted credit facility. But with the recent rise in the inflation rate it begs the question of how well the CBN's policies will work in Q1 and Q2 2020 (see table 2 below).

Table 2 Macroeconomic Variables Aug. 2019-Febr. 2020



Macroeconomic variables






Interest rate






Exchange Rate



Source: CBN, NBS, Proshare Research

The MPC will be meeting next week and issues of concerns likely to arise will be evaluation of its policy response to the coronavirus, dilemma of depleting foreign reserves given the fall in oil prices and the rise in inflation rate. The outcome of the MPC meeting will give a clearer picture of where the economy is headed in months to come (see Chart 3 below).


Chart 3: Nigeria Foreign Reserves ($'bn) 2019-2020

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Source: CBN, Proshare Research


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