December 2022 Inflation – Food Prices Still High

Economic Growth Weakens as Oil Production Woes Persist


Headline Inflation eased in December 2022 after ten consecutive months of upward trend. The figure printed at 21.34% year-on-year (November 2022: 21.47%).

The sub-components of inflation, Core Inflation rose to 18.49% YoY (November 2022: 18.24%), while Food Inflation declined to 23.75% YoY (November 2022: 24.13%).

On a month-on-month basis, Headline Inflation rose to 1.71% in December 2022 from 1.39% in November 2022. In the same vein, Food Inflation rose to 1.89% in December 2022 from 1.40% in November 2022. Core Inflation declined in December 2022 to 1.33% from 1.67% in November 2022.


The year-on-year decline in headline inflation was due to base effects (i.e., there was an abnormal jump in the CPI index between November 2021 and December 2021. The differential those two months was higher than the differential between November 2022 and December 2022. Therefore, the high base makes it appear that inflation pressures between are moderating when it is, in fact not). This is evidenced in the month-on-month inflation increase  inflation to 1.71% (Previous month: 1.39%). The month-on-month inflationary pressure was driven by food prices, which we believe was due to the full manifestation of the October 2022 flooding that destroyed crops, properties, and public infrastructure. Therefore, food supply took a hit. As noted above, food inflation in December 2022 rose to 1.89% on a month-on-month basis, from 1.40% in November 2022.


In the near to medium term, we expect to see sustained pressure on prices. We believe that the spill over of flooding will extend into Q1 2023 at least. Over extended periods, while the structural issues would continue to drive inflationary pressures, the Nigerian economy might record a higher-than-normal price increases. This is because of our expectations that a new government might partially remove petrol subsidy. If that happens, an initial impact could drive prices up significantly. Global trends would also play a major part on the direction of domestic inflation. Although global commodity prices have normalised from their highs, the supply chain disruption is still present as the war between Russia and Ukraine continues. A recent rise in COVID infections across the globe – particularly in China could worsen the supply chain disruption.

Policy Response

When inflationary pressures worsen, it means a loss of value in Naira assets. Naturally, investors would forgo Naira assets for other foreign denominated assets with a better store of value. When that happens, the exchange rate worsens and given the structure of the Nigerian economy, the implications are worse for consumer welfarism. Therefore, to attract interest in Naira assets, the need to increase rates is rational.

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