Nigeria recently updated its Consumer Price Index (CPI) base year from 2009 to 2024, leading to a significant adjustment in its reported inflation rate. Following this change, inflation dropped from 34.80% in December 2024 to 24.48% in January 2025.
Despite a recent decline in the reported inflation rate, many Nigerians continue to face significant challenges due to elevated living expenses. This situation is influenced by several factors, including rising food and fuel prices, stagnant wages, and the devaluation of the naira, making it difficult for many to afford basic necessities.
Why Are Nigerians Still Struggling with High Living Costs Despite Lower Inflation?
1. Stagnant salaries amid high cost of things
Although official inflation figures have decreased, the prices of essential goods and services, particularly food and transportation, remain high. Wages have not kept up with these increasing costs, intensifying the financial burden on numerous Nigerian households. In response, labor unions have advocated for higher minimum wages to mitigate the impact of inflation.
For instance, in 2024, the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) initiated a general strike demanding an increase in the monthly minimum wage from ₦30,000 to ₦494,000. After negotiations, a new minimum wage of ₦70,000 was agreed upon, with provisions for reviews every three years.
2. High fuel and transportation fees
The removal of fuel subsidies has led to a significant increase in fuel prices, triggering a ripple effect on transportation costs and the prices of goods. This escalation has strained both businesses and consumers. To address this, the Nigerian government launched a compressed natural gas (CNG) program, aiming to reduce transport costs by nearly 50%. Over 100,000 vehicles have been converted to use CNG, with plans to convert 1 million in the next three years. However, adoption has been slow due to inadequate infrastructure and limited public awareness.
3. Persistent food price inflation
Food prices continue to be a major concern, with rising costs affecting the affordability of basic necessities for many households. Economic reforms, such as the devaluation of the naira and the removal of petrol subsidies, have exacerbated living costs, contributing to food insecurity. A report by the Nigerian government and the United Nations projected that 33 million people could be food insecure by August 2025, up from 24.8 million, due to economic hardships and inflation.
4. Naira devaluation
The depreciation of the naira has led to increased costs for imported goods, further elevating the overall cost of living. In an effort to stabilize the economy, the government has proposed tax reforms, including plans to nearly double the value-added tax (VAT) to 12.5% by 2026, with exemptions for essential items like food and medicine. This measure aims to reduce inflation from 34.8% in December 2024 to 15%. However, critics argue that the VAT increase could hinder consumption and industry growth.
5. Supply chain disruptions and production costs
Supply chain disruptions and increased production costs, including those related to fuel and transportation, have also contributed to the high cost of living. For example, Lagos’s vibrant nightlife has suffered due to the cost-of-living crisis, with economic hardships reducing middle-class spending power and leading to empty bars and reduced consumer spending.
6. Ineffective government policies and corruption
Some sources cite ineffective economic policies and corruption as contributing factors to the high cost of living. For instance, the Federal Competition and Consumer Protection Commission (FCCPC) sued MultiChoice Nigeria Limited for ignoring regulatory orders to hold off on a proposed price increase for their pay-TV services, highlighting challenges in regulatory compliance and enforcement.
7. Global economic factors
External factors, such as global commodity price fluctuations and international conflicts, have also contributed to the challenges faced by Nigerian households. The war in Ukraine, for example, has had ripple effects on global food prices, further impacting the affordability of basic necessities in Nigeria.
While official inflation rates may have declined, the cost of living in Nigeria remains high due to a combination of domestic and international factors. Addressing these challenges requires comprehensive policy interventions, effective implementation, and collaboration between the government, private sector, and civil society to ensure that economic growth translates into improved living standards for all Nigerians.
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