We bet you clicked this article with the same question in mind… Why?? Why is everything so expensive? Why does it feel like you’re getting less for more? Why does the same amount of money that once stretched across your needs now seem inadequate? Well, ladies and gentlemen, we have a serious inflation problem.

Take rice, for instance. In 2023, a kilogram of rice cost about ₦555. Just one year later, in 2024, that same kilogram costs approximately  ₦1,600. That’s nearly a threefold increase! Or consider beans, which jumped by a staggering 219%, from ₦630 per kilogram to over ₦2,000 in the same period. These are just a few examples. Virtually every essential commodity has experienced a similar price surge. But why? What’s driving this relentless overnight inflation? 

This article dives deep into the factors that have contributed to this overwhelming rise in prices in just the span of a year. We’ll explore everything from inflation, insecurity, and infrastructure issues to global economic factors and government policy. Welcome to Nigeria’s inflation rollercoaster, where prices seem to be on a never-ending upward spiral.

What Is Inflation, and Why Is It So Rampant?

Before we dive into the specifics, let’s quickly define the elephant in the room: Inflation. In simple terms, inflation is the continuous rise in the prices of goods and services, coupled with a decline in the purchasing power of money over a period of time. This means that the same ₦20,000 you had in 2023 can no longer buy you as much in 2024.

To put this into perspective, imagine you bought a Samsung Galaxy Note 10 for the sum of ₦220,000 last year. Today, that same phone costs over ₦400,000. And unfortunately, this is not an isolated case. The same principle applies to your groceries, rent, transportation, and virtually everything else!

But inflation isn’t always bad. Economists generally consider a little inflation (around 2% annually) as a sign of a healthy economy. It encourages spending and investment because people anticipate that prices will rise in the future. However, when inflation soars beyond manageable limits, as it has in Nigeria, it becomes a crisis.

Why Has Inflation Run Wild in Nigeria?

Now that we understand what inflation is, the big question is—what’s causing it to spiral out of control in Nigeria? In 2024, inflation reached a 34.19% high—the highest in nearly three decades. And while inflation is a global phenomenon (worsened by the COVID-19 pandemic and geopolitical tensions), Nigeria’s inflation problem is unique and driven by several factors, both internal and external. Here are the 5 major factors:

1. Currency Devaluation and Exchange Rate Woes

The value of the Nigerian naira has plummeted against global currencies, especially the US dollar. In a highly import-dependent country like Nigeria, this is a recipe for disaster. As the naira loses value, the cost of importing essential goods—like food, fuel, and technology—rises dramatically. Businesses that rely on imports have no choice but to pass these costs on to consumers, leading to widespread price hikes.

2. Insecurity: The Silent Killer of Agricultural Production

Agriculture forms the backbone of Nigeria’s economy, contributing around 25.18% of the country’s real GDP in 2023. However, over the past few years, Nigeria has faced an escalating security crisis. Farmers in key regions have been subjected to extortion, kidnappings, and violent attacks by insurgents and bandits. This has forced many farmers to abandon their fields, drastically reducing the country’s food supply.

With less food being produced and transported, and some even exported out of the country, the basic economic principle of supply and demand kicks in. Scarcity drives prices up, and the limited food that does make it to the domestic market is sold at a premium, further exacerbating food inflation. In fact, food inflation alone sits at a staggering 40.66%, making it one of the key contributors to the overall inflation crisis.

3. Infrastructure Problems: Getting Food to Where It’s Needed

Even when food is produced, getting it to consumers is another nightmare. Nigeria’s infrastructure—particularly its road networks—has long been a bottleneck. Roads are either in poor condition or are unsafe to travel due to the same security concerns plaguing farming communities. To make matters worse, the government’s removal of fuel subsidies in 2023 has led to a surge in transportation costs. The result? Food prices go even higher, as transporters charge more to compensate for fuel costs.

4. Fuel Subsidy Removal: A Necessary Evil?

Speaking of fuel, the Nigerian government’s decision to remove fuel subsidies in 2023 was aimed at reducing the country’s fiscal deficit. While the policy may have been economically sound in the long run, its immediate impact has been catastrophic for the average Nigerian. Fuel prices have more than doubled, and because fuel is essential for transportation and logistics, the cost of transporting goods, including food, has skyrocketed. This has sent the prices of virtually everything into a tailspin.

5. Global Supply Chain Disruptions

Let’s not forget that Nigeria is part of the global economy. Global supply chain disruptions—caused by the pandemic, geopolitical conflicts, and climate change—have led to shortages of key goods. For instance, the war in Ukraine disrupted the global wheat supply, driving up the price of flour, a key ingredient in many Nigerian staples. The ripple effects of these global issues are felt strongly in Nigeria, where local production is insufficient to meet demand.

The Human Cost: How Nigerians Are Struggling to Cope

The harsh reality is that Nigerians are feeling the pinch more than ever before. A 2019 report by the National Bureau of Statistics revealed that 56.65% of household income was spent on food. Fast forward to 2024, and that figure has risen to nearly 60%. This means that for every ₦100,000 a Nigerian earns, ₦60,000 goes to food alone. For small businesses, the situation is even more dire: around 70% of their income is spent on family and feeding.

With so much of their income going toward basic necessities, Nigerians have little left for other essentials like healthcare, education, and housing. The rising cost of living is pushing many into deeper poverty, and small businesses are struggling to stay afloat.

Can Anything Be Done?

At this point, the question on everyone’s mind is: What can be done? Is there any hope for reversing these trends and bringing prices back down to reasonable levels? Here are 3 crucial steps to take:

1. Fixing Structural Issues

The first and most obvious solution is to address Nigeria’s structural issues. The government must tackle insecurity head-on to allow farmers to return to their fields. At the same time, improving the country’s infrastructure—particularly roads and power—will help reduce the cost of doing business, especially in agriculture and manufacturing.

2. Monetary Policy Adjustments

One tool the government could employ is adjusting monetary policy—specifically, raising interest rates to curb inflation. This has been done successfully in other countries, like the United States, which raised interest rates from near zero to 5.25% following the pandemic. However, this method comes with its own caveats. Higher interest rates make borrowing more expensive, which can stifle investment and slow economic growth. Finding the right balance is what should be ultimately considered.

3. Diversifying the Economy

Nigeria must also focus on diversifying its economy. For too long, the country has been overly reliant on oil exports, which leaves it vulnerable to fluctuations in global oil prices. By investing in other sectors—like technology, agriculture, and manufacturing—Nigeria can build a more resilient and robust economy that isn’t as susceptible to external shocks.

Conclusion:What You Can Do & How We Can Help

Will prices ever come down? It’s hard to say for sure. The reality is that inflation is a complex problem that requires a multi-faceted approach to solve. However, there are steps you can take to protect your finances even as Nigeria inches closer to the 50% hyperinflation benchmark. 

That’s where we come in—Bravewood. We understand the struggles everyday Nigerians face amidst inflation. Our investment solutions offer a safeguard against rising prices and devaluing currency, with a unique daily compounding feature that maximizes your returns. Choose from our tailored products:

• Prime: Enjoy flexible monthly withdrawals with a 16% annual return on investment.

• Max: Lock in your funds for 90, 180, or 365 days and earn up to 22% annually.

• Child: Secure your child’s educational future with a 16.5% annual return, designed specifically for school needs.

With daily compounding, your investments grow faster, giving you a head start on inflation.

So, as you walk into the market tomorrow and see that the price of rice has jumped again, remember—it’s not just happening to you. It’s happening to millions of Nigerians, and while the factors driving these price increases are complex, understanding them is the first step toward addressing them. 

In the end, while we may not have control over macroeconomic factors, we can take steps to protect ourselves from inflation’s bite. This includes, but is not limited to, saving what you can, investing wisely, continuously improving your skills to increase your income, and maintaining a healthy budget. It’s going to be a difficult journey, but with the right policies at a macro level and strategy and resilience on our part, there is hope in sight for a more stable future.

Bravewood is licensed by the Central Bank of Nigeria to provide investments with low risk and high returns for Nigerian professionals.