The Nigerian Economic Summit Group has said that inflation weakened the naira by 14.9 per cent, adding that the naira redesign plan of the Central Bank of Nigeria triggered the devaluation of the country’s currency.

The NESG said this in its 2023 Macroeconomic Outlook Report titled ‘Nigeria in Transition: Recipes for Shared Prosperity.’

The report reflected on the issue of inflation in the country, noting the major inflationary drivers.

It read in part, “A further breakdown of the inflation numbers showed that the Food and Core inflation averaged 20.6 per cent and 15.8 per cent, respectively, in 2022. Since the country relied heavily on imports for manufactured and industrial intermediate goods, global inflationary pressure permeated all productive activities in Nigeria.

“Domestically, a combination of cost-push and demand-pull factors constituted significant drivers of the surge in the general price level. Some of these factors include shortage of industrial inputs, insecurity, lower agricultural productivity, the high price of fuel, logistics problems, increased VAT, increasing energy cost (electricity), and foreign exchange scarcity.

“Since the demand for necessities is relatively inelastic – the change in demand is relatively unresponsive to the change in price – many businesses transferred additional production costs to consumers, resulting in higher overall prices for goods and services, particularly food.”

The report further noted that the purchasing power of N1000 in January 2022 fell to N851 by the end of the year

“On the welfare side, rising inflationary pressures reduced households’ purchasing power and access to necessities. To illustrate, the purchasing power of N1000 in January 2022 had fallen to N851 by the end of the year. This situation exacerbates various forms of poverty – monetary and non-monetary deprivation – and contributes to Nigeria’s multi-dimensional poverty, which is currently estimated to affect over 6 out of every 10 Nigerians,” the report noted.

The NESG also said that the naira depreciated by 2.4 per cent and 30.01 per cent in the Investors and Exporters and parallel market rates.

It said, “In 2022, Naira depreciated by 2.4 per cent and 30.1 per cent in the Investors’ & Exporters (I&E) and the parallel market rates to N451/US$ and N745/US$, respectively. Consequently, the premium (the gap) between the official and the parallel markets expanded from N55 (18 per cent of the official rate) at the beginning of the year to N294 (65 per cent) at the end of 2022.”

The NESG added that the naira depreciated, especially in the parallel market, due to the move by the CBN to redesign the country’s currency.

The report read, “Also, in December 2022, the Monetary Authority initiated the redesign of the N200, N500, and N1,000 notes to manage Naira liquidity. This action triggered further depreciation of the Naira against the US dollar in the foreign exchange rate market, especially the parallel market rate. Aside from the CBN currency redesign, other issues that triggered Naira depreciation include US monetary policy tightening that strengthened the US dollar and the proliferation of political activities with the US dollar.”

It was also noted that the inflation rate will likely average 20.5 per cent in 2023 and the unemployment rate will increase by 37 per cent with a poverty headcount at 45 per cent this year.