Consumers purchasing power has significantly eroded again as inflation rose to a record 18-year high in July 2023 following the recent removal of fuel subsidy and the unification of exchange rates.

The National Bureau of Statistics, on Tuesday, revealed that inflation rose to 24.08 per cent year-on-year in July, a 1.29 percentage points increase from the 22.79 per cent that was recorded in June 2023.

The last time Nigeria’s inflation rate was above 24 per cent was in September 2005, when headline inflation was 24.30 percent.

It noted that the high cost of food and non-alcoholic beverages contributed 12.47 per cent year-on-year to the growth of inflation in July.

In its ‘Consumer Price Index (July 2023)’ report, the NBS said. “In July 2023, the headline inflation rate rose to 24.08 per cent relative to June 2023 headline inflation rate which was 22.79 per cent.

“Looking at the movement, the July 2023 headline inflation rate showed an increase of 1.29 per cent points when compared to June 2023 headline inflation rate.

“On year-to-year basis, the headline inflation rate was 4.44 percent points higher compared to the rate recorded in July 2022, which was 19.64 per cent. This shows that the headline inflation rate (year-on-year basis) increased in July 2023 when compared to the same month in the preceding year (i.e., July 2022).”

Other contributors to the growth of inflation in July include housing water, electricity, gas and fuel (4.03 percent y-o-y), clothing and footwear (1.84 percent y-o-y), transport (1.57 percent y-o-y), furnishings and household equipment and maintenance (1.21 percent y-o-y), and others.

July is the seventh consecutive month that inflation has risen in 2023 and is the first time that the inflation rate is capturing the impact of fuel subsidy removal and the unification of the exchange rate.

These two policies were recently implemented by the administration of Bola Tinubu to reform the economy.

The Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, stated that the combined forces of fuel subsidy removal and the foreign exchange crisis contributed to price hikes which fueled the increase in inflation.

Idahosa said, “The effect of the subsidy removal is what we are seeing. It (subsidy) is the main driver. It is the multiplier effect of the rise in the cost of petrol that we are seeing now. You can say about 80 per cent of the increase is due to fuel subsidy removal. The remaining 20 is because of the foreign currency convergence.”

He expressed worry that if the government does not take deliberate steps to address the situation, inflation could hit 30 per cent by the end of 2023.

According to the Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, the increasing inflation rate in the country will continue to negatively impact Nigerians and businesses.

He said this in a statement on Tuesday. Yusuf stated, “The surging inflation has had a devastating effect on citizens’ welfare and the health of small businesses.”

He noted that spikes in energy prices, rising transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, insecurity in many farming communities, and structural bottlenecks impeding productivity are responsible for the persistent rise in inflation.

The CPPE director further said mounting inflationary pressure is weakening purchasing power, escalating production costs, eroding shareholder value in many businesses, weakening investors’ confidence, and triggering a decline in manufacturing capacity.

On what the government can do, he advised, “Tackling inflation requires urgent government intervention to address the challenges bedevilling the supply side of the economy.”

Also commenting, the National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, noted that small businesses can no longer cope with the rise in inflation figures.

He said, “Small businesses cannot cope with this. They are already tired. It will take God for us to survive this. If we charge the kind of prices we must charge, who will buy our products?”

The National President of the Association of Small Business Owners of Nigeria, Femi Egbesola, added, “It shows that government is not sensitive to the well-being of the MSME sector because you just can’t allow inflation to go on a free fall and believe that everything will normalise naturally. It doesn’t work that way.”

According to the World Bank, Nigeria has one of the highest inflation rates globally and an estimated four million people fell into poverty between January and May 2023.

In its recent ‘Nigeria Development Update,’ the Washington-based lender stated that about 7.1 million Nigerians would become poor if the Federal Government failed does not compensate or provide palliatives, following the removal of fuel subsidy.

It added that inflation may hit 25 per cent by the end of 2023 because of petrol subsidy removal. It further stated that headline inflation will begin to fall by the first quarter of 2024.