In recent times, Nigeria has grappled with an inflation crisis that seems to defy easy solutions. As of March 2025, the country’s annual inflation rate soared to 24.23%, according to the National Bureau of Statistics (2025) and corroborated by reports from Reuters (2025) and The Punch (2025). Behind this alarming figure lies a complex interplay of structural, monetary, and external factors that threaten not only Nigeria’s economic stability but also the welfare of millions of its citizens. Understanding the reasons behind Nigeria’s rising inflation is crucial to discovering permanent solutions.
Nigeria’s Inflation Journey: A Snapshot from 2024 to 2025
The current inflationary spike did not occur in isolation. In March 2024, Nigeria experienced a dramatic inflation surge, reaching a staggering 33.20%—the highest level seen in nearly three decades (Reuters, 2024). This event was a wake-up call for policymakers, businesses, and households alike, highlighting deep-seated vulnerabilities in the economy.
Amid this turmoil, the National Bureau of Statistics undertook a major statistical adjustment, updating the Consumer Price Index (CPI) base year to 2024 to better reflect prevailing economic realities (National Bureau of Statistics, 2025). Following this revision, inflation appeared to ease slightly, falling to 23.18% by February 2025 (Reuters, 2025). However, this apparent relief was short-lived; by March 2025, inflation climbed again to 24.23% (Nairametrics, 2025). Despite the technical recalibration, the fundamental forces behind the inflationary trend remained largely unaddressed.
Forecasts by Trading Economics (2025) suggest that without significant fiscal and monetary interventions, inflation could remain entrenched, creating deeper economic scars.
Structural and Monetary Roots of Nigeria’s Inflation
Several domestic factors are responsible for Nigeria’s persistent inflation woes. Research by Okeke, Ohazulume, and Emerenini (2022) identified critical drivers including rapid money supply growth, expansive government spending, and exchange rate volatility. This view is supported by Njoku, Okereke, and Durieke (2021), who emphasized that the continuous depreciation of the naira against foreign currencies exacerbates inflationary pressures.
A closer look at Nigeria’s flexible exchange rate system reveals a significant link to inflation. Nuhu (2020) explained that frequent exchange rate fluctuations feed directly into domestic prices. As the naira weakens, imported goods, including food, machinery, and fuel—become more expensive, creating a ripple effect across various sectors of the economy.
Adding to these challenges are structural issues such as poor infrastructure, an overreliance on oil exports, and weak governance institutions. According to the International Monetary Fund (IMF, 2023), these systemic problems limit the country’s productive capacity, making it highly vulnerable to supply-side shocks.
The Monetary Policy Response: Tightening the Screws
Confronted with mounting inflation, the Central Bank of Nigeria (CBN) adopted a hawkish monetary stance. In May 2024, the Monetary Policy Committee (MPC) raised the benchmark Monetary Policy Rate (MPR) to 26.25%, marking one of the most aggressive rate hikes in recent history (Proshare, 2024). The primary aim was to tame inflation by tightening liquidity and curbing demand-side pressures.
While higher interest rates are theoretically effective in controlling inflation, they come at a cost. Borrowing becomes more expensive for businesses and households, dampening investment, consumer spending, and overall economic growth. Given Nigeria’s already high unemployment and poverty rates, this tightening strategy risks deepening economic hardship for many citizens.
Read also: Nigerians Groan Over Food Prices As Inflation Hits 33.69%
External Forces: Imported Inflation and Global Shocks
Nigeria’s inflation struggles are not entirely homegrown. External shocks have played a significant role, compounding domestic vulnerabilities. The World Bank (2023) highlighted that global supply chain disruptions, fueled by the aftermath of the COVID-19 pandemic and geopolitical tensions like the Russia-Ukraine war, have pushed up the cost of essential imports worldwide.
For Nigeria, which heavily depends on imports for food, energy, and manufactured goods, these global price surges translate directly into domestic inflation. The African Development Bank (2021) had warned of this exposure years ago, pointing out that Africa’s largest economy remains dangerously undiversified and thus highly sensitive to external economic shocks.
How Inflation is Reshaping Daily Life
Behind the percentages and technical analyses lies a human story—one of hardship, difficult choices, and dwindling hopes. Food inflation, in particular, has been ruthless. According to The Punch (2025) and Nairametrics (2025), the cost of staples such as rice, bread, and yams has skyrocketed, placing basic nutrition increasingly out of reach for low- and middle-income families.
Proshare (2024) paints an even grimmer picture: faced with runaway costs and stagnant incomes, many Nigerian households have been forced to cut back on vital expenses like healthcare, education, and housing. Businesses, too, are feeling the pinch, as higher operating costs squeeze already-thin profit margins and discourage expansion.
The result is a vicious cycle where inflation erodes purchasing power, reduces demand, depresses production, and triggers job losses—further entrenching poverty and inequality.
Can Nigeria Find a Way Out?
Despite the daunting challenges, there is still a path toward stabilization, provided bold and coordinated actions are taken. The IMF (2023) and World Bank (2023) propose several strategies:
- Exchange Rate Reforms: Nigeria must move toward a more transparent and unified exchange rate regime to reduce distortions and imported inflation pressures.
- Fiscal Consolidation: The government needs to aggressively cut wasteful spending, broaden its tax base, and channel resources into growth-enhancing sectors like infrastructure, education, and healthcare.
- Boosting Domestic Production: Investing heavily in agriculture and manufacturing will help Nigeria reduce its dependence on imports, create jobs, and stabilize prices.
- Structural Reforms: Improving the ease of doing business, fighting corruption, and strengthening institutions are critical to building long-term economic resilience.
Furthermore, the World Bank (2023) emphasizes the urgent need to reform Nigeria’s energy sector, given its centrality to industrial productivity and overall economic competitiveness.
Conclusion: Inflation as a Test of Will
The inflation crisis currently engulfing Nigeria is a symptom of deeper, structural weaknesses combined with external shocks. While recent adjustments to statistical measures like the CPI base year have provided some clarity, they have not altered the fundamental reality: Nigeria’s economy remains vulnerable and inflation-prone.
At 24.23% inflation as of March 2025 (National Bureau of Statistics, 2025), Nigeria faces a defining moment. Policymakers must resist the temptation of half-measures and tackle the roots of the crisis head-on. Comprehensive reforms across monetary policy, fiscal management, production, and governance are urgently needed.
The battle against inflation will not be quick, and the sacrifices will be significant. Yet if Nigeria can muster the political will, strategic discipline, and social consensus necessary for reform, it can turn the tide. In doing so, it would not only tame inflation but also lay the foundation for a more prosperous, resilient, and inclusive economy in the years to com
References
African Development Bank (2021) ‘African Economic Outlook 2021: Nigeria’, African Development Bank, May. Available at: https://www.afdb.org/en/knowledge/publications/african-economic-outlook (Accessed: 26 April 2025).
International Monetary Fund (2023) ‘Nigeria: 2022 Article IV Consultation – Press Release; Staff Report; and Statement by the Executive Director for Nigeria’, IMF Country Report No. 2023/093, IMF, Washington, DC (Accessed: 26 April 2025).
National Bureau of Statistics (2025) ‘Consumer Price Index and Inflation Rate (Base Period 2024 = 100)’, Nigerian Bureau of Statistics Open Data Portal. Available at: https://www.nigerianstat.gov.ng/ (Accessed: 26 April 2025).
National Bureau of Statistics (2025) ‘Nigeria’s annual inflation picks up to 24.23% in March 2025’, Reuters, 15 April. Available at: https://www.reuters.com/world/africa/nigerias-annual-inflation-picks-up-2423-march-2025-04-15/ (Accessed: 26 April 2025).
Nairametrics (2025) ‘Nigeria’s inflation rate rises to 24.23% in March 2025’, Nairametrics, 15 April. Available at: https://nairametrics.com/2025/04/15/nigerias-inflation-rate-rises-to-24-23-in-march-2025/ (Accessed: 26 April 2025).
Njoku, C.C., Okereke, I. and Durieke, C.N. (2021) ‘A Co-integration Approach to the Determinants of Inflation in Nigeria’, African Journal of Economics and Sustainable Development, 4(3), pp. 26–44 (Accessed: 26 April 2025).
Nuhu, A.Z. (2020) ‘Flexible exchange rate system and inflation nexus in Nigeria’, African Banking & Finance Review, 4(1), pp. 81–87 (Accessed: 26 April 2025).
Okeke, C.C., Ohazulume, C.G. and Emerenini, F. (2022) ‘The Determinants of Inflation in Nigeria’, African Journal of Economics and Sustainable Development, 5(3), pp. 54–72. DOI: 10.52589/AJESD-VLI3AGIB (Accessed: 26 April 2025).
Proshare (2024) ‘CBN MPC Raises MPR to 26.25%: Hawkishness Persists as Inflation Fears Wax Stronger’, Proshare, 21 May. Available at: https://www.proshare.co/articles/cbn-mpc-raises-mpr-to-26-25-hawkishness-persists-as-inflation-fears-wax-stronger?category=Monetary+Policy&classification=Read (Accessed: 26 April 2025).
Proshare (2024) ‘Nigeria March 2024 inflation rises to 33.20%: Options for households’, Proshare, 15 April. Available at: https://proshare.co/articles/nigeria-march-2024-inflation-rises-to-33-20-the-options-for-households?category=Nigeria+Economy&classification=Read (Accessed: 26 April 2025).
Reuters (2024) ‘Nigeria inflation climbs to 33.20% in March 2024 – 28-year high’, Reuters, 15 April. Available at: https://www.reuters.com/world/africa/nigeria-inflation-rises-3320-year-year-march-2024-04-15/ (Accessed: 26 April 2025).
Reuters (2025) ‘Nigeria inflation eases to 23.18% in February after data overhaul’, Reuters, 17 March. Available at: https://www.reuters.com/world/africa/nigeria-inflation-eases-2318-yy-february-stats-office-says-2025-03-17/ (Accessed: 26 April 2025).
The Punch (2025) ‘Nigeria’s headline inflation rose to 24.23% in March 2025, says NBS’, The Punch, 15 April. Available at: https://punchng.com/nigerias-inflation-rose-to-24-23-in-march-2025-nbs/ (Accessed: 26 April 2025).
Trading Economics (2025) ‘Nigeria Inflation Rate – data and statistics, forecast and chart’, Trading Economics. Available at: https://tradingeconomics.com/nigeria/inflation-cpi (Accessed: 26 April 2025).
World Bank (2023) ‘Nigeria Development Update: Navigating Shocks and Opportunities’, World Bank, October. Available at: https://www.worldbank.org/en/country/nigeria/publication/nigeria-development-update-ndu (Accessed: 26 April 2025).