In a twist of economic developments, the National Bureau of Statistics (NBS) reported an unexpected decline in Nigeria’s transport inflation, breaking a trend that had persisted for over two years. Despite widespread challenges triggered by the removal of the petrol subsidy and a surge in crude oil prices, transport inflation slowed to 27.04% in October 2023, marking the first decline since July 2019.
The removal of the petrol subsidy in Nigeria caused a seismic wave through the transport sector and the broader economy. With Premium Motor Spirit (PMS) prices skyrocketing by over 200%, the domino effect on various modes of transport was inevitable.
The sudden and substantial hike in fuel prices, coupled with the depreciation of the national currency by over 40%, led to a perfect storm for the air travel industry. Airlines, already grappling with escalating aviation fuel costs, found themselves navigating an even more treacherous terrain.
Contrary to the surprising decline in transport inflation, Nigeria’s headline inflation reached its highest level in over 18 years, soaring to 27.33% in October 2023. This marked the 10th consecutive month of increase, with both food and core inflation accelerating.
Food inflation rose to 31.52%, the highest level since August 2005, while core inflation reached 22.58%, the highest since December 2006. Contributions to the year-on-year inflation by divisional level were led by food and non-alcoholic beverages, followed by household consumables, clothing and footwear, and transport.
Experts, including policy and strategy consultant Annie Olaloku Teriba and macroeconomic analyst Samuel Oyekanmi, pointed out the rising cost of transportation as a significant factor contributing to the surge in Nigeria’s food inflation and the headline index. Oyekanmi noted that inflation has risen more rapidly in the southern region due to the impact of transportation costs on the final selling price.
However, amidst these challenges, the surprising decline in transport inflation could suggest a potential stability in transport prices across the country. It’s crucial to note that this doesn’t imply a decrease in transport costs but rather a slowdown in the pace of price increases.
As Nigeria grapples with these economic dynamics, the interplay of subsidy removal, fuel price hikes, and currency devaluation continues to exert inflationary pressures, affecting businesses, consumers, and overall economic stability. The government faces the intricate task of striking a balance between economic growth and stability, prompting calls for strategic policy adjustments. The coming months will be crucial in determining the trajectory of Nigeria’s economic recovery.