Paul Ogbuokiri 
In this report, PAUL OGBUOKIRI notes that Nigeria’s cost-of-living-crisis was worsened by issues such as currency depreciation, heightened fuel and food prices. That has left the purchasing power of the average Nigerian households almost wiped out
According to Financial Sector Economist and Policy Analyst, Olajide Oyadeyi, the Nigerian economyhas recorded some positive developments since the beginning of the year; “but yet insignificant to address Nigeria’s outrageously high cost of living, which has emerged as a significant and pressing issue, particularly among the poor and vulnerable segments of the population.” He said that the situation worsened with the removal of fuel subsidy and devaluation of the Naira and subsequently, when Russia announced its war on Ukraine, leading to the recent soaring prices and falling living standards many Nigerians are facing. He disclosed that high cost of living and the soaring inflation, which remained at 34.80 per cent in December 2024 wiped off the purchasing power of the average Nigerian, saying the cost-of-living crisis was getting worse every month as inflation does not seem to diminish, peaking in June 2024 at 34.20 per cent, the highest inflation figure witnessed since the return to democracy in 1999.
“By implication, the resulting decline in the purchasing power of individuals has led to the closure of many businesses, the rise in poverty, and the fall in production indices in Nigeria as real GDP growth averaged 1.4 per cent over the last eight years compared to 6.5 per cent in the eight years before that (World Development Indicator, 2023). He said that recent positives the economy recorded after the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics(NBS) must remain in that trajectory till December 2025 to force down the high cost of living in the country. Inflation fall after rebasing of CPI index Nigeria’s inflation rate dropped to 24.48 per cent in January 2025, from December’s 34.80 per cent, following the rebasing of the CPI index by the country’s statistical office to more accurately reflect changes in consumption patterns. The National Bureau of Statistics (NBS) clarified that the decline in the rebased inflation rate does not reflect a decrease in the general price level, attributing the drop to the new base year (2024) being closer to the current period. Rebased food inflation, which constitutes more than 50 per cent of Nigeria’s old inflation basket, was 26.08 per cent year-on-year in January, down from 39.84 per cent in December when the old methodology was applied. Similarly, the rebased core index, which excludes the prices of volatile agricultural produce and energy stood at 22.59 per cent on year in January, down from 29.28 per cent in the month before. The broader trend shows that inflation has climbed sharply as a result of moves by President Bola Tinubu to end costly subsidies and devalue the local Naira currency. Inflation decline raises hope on Naira The Comercio Partners, in its 2025 macroeconomic outlook, disclosed that the rebasing of Nigeria’s Consumer Price Index (CPI) to 2024 would also create statistical effects that could lower inflation figures. Expectedly, Nigeria’s annual inflation rate dropped to 24.48 per cent in January.
The figure is down from the previous month’s figure after Nigeria’s Consumer Price Index (CPI) was rebased for the first time in more than a decade. From the stabilisation of exchange rates, the normalisation of energy prices following the subsidy removal to improved liquidity in the forex market, Comercio Partners say the economy has what it takes to achieve price stability within the year. The Comercio Partners’ reports emphasised the importance of local refining capacity expansion, particularly with the launch of the Dangote Refinery. This development is expected to reduce the impact of exchange rate fluctuations on energy prices. By relying more on domestically refined petroleum, Nigeria is likely to see a reduction in energy price volatility. This, combined with a more stable exchange rate, is expected to lower production and transportation costs, creating a positive ripple effect throughout the broader economy. The Head, Investment Research and Global Macro Strategist, Ifeanyi Ubah, said: “We expect headline inflation to decrease to around 15 per cent in the first half of 2025, indicating a gradual return to economic stability.” The report also emphasised the importance of local refining capacity expansion, particularly with the launch of the Dangote Refinery. This development is expected to reduce the impact of exchange rate fluctuations on energy prices.
By relying more on domestically refined petroleum, Nigeria is likely to see a reduction in energy price volatility. This, combined with a more stable exchange rate, is expected to lower production and transportation costs, creating a positive ripple effect throughout the broader economy. MPC keeps benchmark interest rate steady Determined to tame the inflation and sustain exchange rate stability according experts, was the part of the key parameters that determined the Monetary Policy Committee (MPC) decision to keep rates unchanged at its 299th meeting recently in Abuja. Accordingly, the Committee voted to hold the MPR constant at 27.50 per cent and retain all other parameters – Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) and Merchants Banks at 50 per cent and 16 per cent, respectively; the asymmetric corridor around the MPR at +500bps/-100bps and the liquidity ratio at 30 per cent. Economists polled by Reuters had been split on what the Central Bank of Nigeria would do, partly because of a rebasing exercise by the NBS, which resulted in a sharply lower inflation reading in January of 24.48 per cent year on year. The CBN’s Monetary Policy Rate remained at 27.50 per cent, after 875 basis points of rate hikes in 2024 as the bank stepped up its fight against inflation. The Central bank Governor, Olayemi Cardoso, told a press conference that the Monetary Policy Committee was satisfied by recent macroeconomic developments and they were expected to help price dynamics. “Inflation is trending down, and it’s looking positive,” Cardoso told reporters, adding that the aim was to bring inflation down to single digits. He said the Central Bank would analyse more rebased inflation releases to firm up its view on the inflation outlook. Among potential inflationary risks he cited food prices.
“We can see that confidence is gradually returning to our markets, which shows that we are on the right course now. Obviously, as that happens, we are in a better position to begin the process of moderating rates because stability is very, very important,” Cardoso said. Naira rally against Dollar The US Dollar continued to cede ground to the Naira in the beginning of the year following positive market performance and Central Bank of Nigeria (CBN’s) reforms impact on the economy. For long, Dollar dominance has constituted a major challenge for emerging markets and import-dependent economies like Nigeria, where higher greenback valuation hinders macroeconomic indicators. But after a series of reforms instituted by the Central Bank of Nigeria (CBN) to prop up the Naira and reduce dependence on the Dollar, the local currency started to find its lost voice in the exchange rate market. For instance, the Naira recorded a major comeback in February, positing one of its biggest wins in recent months. The local currency, which opened February at N1, 640 to a Dollar at the parallel market, closed the month stronger at N1, 495 to a Dollar, representing N145 gain. At the official market, the Naira closed at N1, 492 from N1, 620 it started the month of February on. “A stabilising Naira is good for everyone stabilising at both the official markets, but sad over capital losses.
This is not the time to hoard Dollars because Naira is fast finding its feet,” Olakunle Amos, FX trader based in Mushin Lagos said. A retired CBN Director, Prof. Jonathan Aremu, described the currency’s steady appreciation against the Dollar as a positive development. Aremu, a Professor of International Economic Relations at Covenant University, is also a Regional Expert on Trade and Investment for ECOWAS. Aremu called for increased production to sustain the Naira’s gains. He urged the CBN to focus on boosting productive activity in the economy to maintain stability. According to him, the apex bank should look beyond interest rates and consider other factors influencing production and liquidity. “The quantity theory of money states that money supply and population value must equal price and transaction volume in the economy. If a policy only targets money supply without increasing transactions, the expected appreciation of the Naira will not materialise. The economy needs a higher volume of goods and services.
Many goods are available but their prices depend on supply and demand,” he said. President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said he believed the apex bank remained committed to resolving the foreign exchange issues confronting the nation and as such, has been working to manage both the demand and supply side challenges. Specifically, he noted that recent initiatives undertaken by the Bank such as the FX code policy, Electronic Foreign Exchange Matching System (EFEMS), had helped to increase foreign exchange inflow to the country. On his part, CBN Governor, Olayemi Cardoso, described EFEMS as one of the many gains of the exchange rate unification policy, expected to birth several other gains in the market operation. He said the policy will not only put forex market distortions under check, eliminate speculative activities and instill transparency but will also make it difficult for abuse in the market to persist. Cardoso said an enabling policy environment has led to a doubling of monthly remittances from an average of $300 million in 2023 to nearly $600 million in August 2024. “We are committed to further integrating the Nigerian Diaspora into our financial system, exemplified by the introduction of the non-resident Bank Verification Number registration. We expect our financial institutions to develop products that not only enable the Diaspora to support their families but also provide opportunities for savings and investment in Nigeria,” Cardoso said. Cardoso said the current exchange rate for the Naira does not reflect the true value of the local currency. He said the current US Dollar exchange rate reflects the price that the most desperate buyers are willing to pay, and this, in the apex bank’s view, does not represent the true market value of the Naira.
Naira losses steam, records highest depreciation against Dollar The Naira, which has been impressive against the Dollar since the beginning of the year, recorded the highest depreciation against the Dollar across official and parallel foreign exchange markets on Wednesday. This comes as the Central Bank of Nigeria’s exchange rate data showed that the Naira fell to N1, 500.8 per Dollar on Wednesday from N1, 498.98 traded on Tuesday. The development means that the Naira weakened by N8.31 against the Dollar compared to the N1, 498.98 exchange rate on Tuesday. Similarly, at the black market, it slipped to N1, 525 per Dollar on Wednesday from N1, 515 that was exchanged the previous day.
“We buy dollars at N1,515 against Naira and sell between N1,520 and N1,525 on Wednesday,” a Bureau de Change operator at Wuse Zone 4, Abuja, Alhasan Abubakar, disclosed. Sunday Telegraph reports that the depreciation across FX is the highest in the past three days. This comes as Nigeria’s external reserves dropped to $34.34 billion as of 4th March 2025 from $34.41 billion on February 28, 2025, according to the apex bank data. Competition between Dangote, NNPC drives down petrol prices Increased competition between Dangote’s Refinery and NNPC has led to a significant reduction in petrol prices in Nigeria, providing economic relief to consumers. Petrol prices in Nigeria have dropped to N860 per litre, a decrease driven by the growing competition between the new Dangote Refinery and the Nigerian National Petroleum Corporation Limited (NNPC). This price reduction follows several tariff adjustments made by Dangote, whose refinery is the largest on the African continent. The price reduction was accelerated in February 2025, when Dangote cut its deposit tariffs twice.
The pump price, which had reached N1,030 per litre, thus decreased significantly. According to a statement from the group, the initiative aimed to provide relief to Nigerian consumers during the Ramadan period. In response to this competitive dynamic, NNPC also announced a reduction in its prices, aligning them with Dangote’s tariffs. Ademola Adigun, CEO of AHA Strategies Ltd, commented on this trend, emphasising that Dangote’s price cuts were aimed at strengthening its dominant market position. He warned that this pricing strategy could prevent other distributors from competing effectively with Dangote. However, the group firmly denied any accusations of attempting to establish a monopoly. An analyst at SBM Intelligence, Ikemesit Effiong, suggested that the price reductions could also be linked to the stabilisation of the local currency and the drop in global crude oil prices. President of the Major Energies Marketers Association of Nigeria (MEMAN), Clement Isong, added that this market development reflected the deregulation of the sector, where competition now regulates prices.
Also speaking on the development, the Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, predicted that the cost of petrol would continue to decline until June 2025. “So, generally between now and June, we will see prices begin to decline. But after June as things stabilise, depending on what happens in the global oil and currency market, we might begin to see some stabilisation,” Rewane said on Tuesday’s edition of Channels Television’s Business Morning show. According to him, the price war between Dangote Refinery and NNPCL will benefit the consumer more. “In a price war, nobody wins. The consumers win in the short run. Then, eventually the market goes back to where it should be. But, at the end of the day, between now and June, the price leadership will be firmly established,” Rewane said. An economist, Paul Alaje, says the ongoing price war between the Dangote Refinery and the Nigerian National Petroleum Company (NNPC) Limited will “erode abnormal profit” enjoyed by capitalists. “You may want to call it a price war but in economics, when a duopoly fights, it is the best for the populace because they will drive themselves to neutral profits,” Alaje said on Channels Television’s Politics Today programme on Tuesday. He said Nigerians should be happy there is no agreement between NNPCL and Dangote Refinery. “More of the competition should go on,” the economist said, noting that “if any of them fizzle out, be ready to buy (petrol) at over N1,000 again,” he said
