A Policy Test for the August Protest

Several groups across the country began a 10-day protest against naira devaluation and a spike in petrol prices, respectively.

Could these twin policies account for all the changes in price levels month on month? Could there be other drivers of food and non-food inflation? Let’s see.

Core inflation increased from 15.7% in June 2022 to 27.4% in 2024. Food Inflation also increased from 20.6% to 40.87% in the same period.

This significant rise in both core and food inflation has severely affected the purchasing power of Nigerians, with many average ​​households struggling to afford food and essential goods. 

In a country where 40.1% of the population lives below $2.15 per day, an increase in the inflation rate further deepens deprivations of quality healthcare, education, and housing.

The inflation rate during Tinubu’s administration is the highest in the past 25 years.

Besides, all forms of inflation rose the most during the Tinubu administration’s first year in office compared to the first year of previous administrations since 2007.

Policy Test: Are Petrol and Forex Prices responsible for Inflation?

Of these two policies, only fluctuations in the exchange rate have a noticeable connection to the three types of inflation. Changes in petrol prices have minimal or no connection with inflation, casting doubts about the claim that change in petrol price is the primary driver of food and non-food prices.

The moderate relationship between exchange rate fluctuations and the 3 types of inflation suggests a connection to the rising prices of imported and locally grown food.

Higher forex rates increase the cost of food imports and the selling prices too. 

The country’s devalued currency also incentivises local farmers and middlemen to transport farm produce across the borders to neighbouring countries to sell at more valuable currencies. This reduces the local food supply and increases the local food inflation rate.