Naira Stability and Import Duty Waiver Drive Imported Food Inflation to Five-Year Low
By Okafor Joseph Afam | January 20, 2025
The relative stability of the naira in December 2024, coupled with the federal government’s introduction of a 150-day window import duty waiver on essential food staples, led to a significant slowdown in imported food inflation, which reached its lowest level since September 2019.
While headline inflation continued its upward trend, rising to 34.8 percent in December, the momentum of increase has notably slowed for the second consecutive month. This highlights the impact of the Central Bank of Nigeria’s (CBN) sustained tight monetary policy, aimed at curbing inflationary pressures.
In a note published Thursday, analysts at FBNQuest Capital Research noted that imported inflation had moderated to 41.29 percent year-on-year, down from 42.29 percent in November. This marks the first pause in imported food inflation since September 2019, a promising sign amid rising overall inflation.
The deceleration in imported food prices is attributed to several factors: the naira’s reduced volatility in December, decreased incentives to import food due to the high cost of foreign exchange, and the 150-day import duty waiver introduced by the government on essential food items.
The naira’s stabilization has been aided by the greater transparency and efficiency introduced through the Electronic Foreign Exchange Matching System (EFEMS), which was launched in December 2024. This system has helped narrow the exchange rate gap, with the naira appreciating by N125 to the dollar one month after its implementation. Some analysts believe this could mark the beginning of a more sustained recovery for the currency.
Despite the government’s best efforts to curb food inflation, a series of policy measures launched mid-year, including the import duty waiver, did not entirely meet expectations. The six-month tariff moratorium ended on December 31, 2024, but the arrival of a significant consignment of 32,000 tons of rice from Thailand, the first such import in a decade, provided a much-needed boost to food supply.
Meanwhile, food inflation showed signs of easing. According to the National Bureau of Statistics (NBS), food inflation fell slightly to 39.84 percent in December, down from 39.93 percent in November. The reduction was driven by price decreases in essential items such as bread, cereals, soft drinks, potatoes, and yams.
The NBS also revealed that it was nearing the completion of the rebasing of Nigeria’s Consumer Price Index (CPI), which is expected to be finalized by the end of January 2025. This new methodology, which proposes using 2024 as the base year (as opposed to the current 2009 base), will adjust the way inflationary trends are calculated. It’s expected that the re-weighting of components such as food prices, electricity, and gas will soften the impact on the overall headline inflation rate.
Looking ahead, analysts at CardinalStone Research, a prominent investment firm, forecast a decline in inflation for January 2025. This is expected due to the high
