Economists Blame Energy Costs as Inflation Surges to 33.88%

Nigeria’s inflation rate hit a staggering 33.88% in October, driven primarily by soaring energy costs. The surge, the highest in recent years, has compounded economic challenges for businesses and households alike.

The Role of Energy Costs

Economic experts highlight rising energy expenses as the core factor behind the inflationary trend:

– **Fuel Prices**: The removal of subsidies earlier in the year led to a sharp increase in petrol prices, triggering higher transportation and production costs.
– **Electricity Tariffs**: Businesses and households are grappling with steep electricity tariffs, inflating the cost of goods and services.
– **Currency Depreciation**: A weakened naira has made imported energy inputs more expensive, further fueling price increases.

“Energy costs permeate every sector of the economy, affecting production, logistics, and household spending. This is a textbook example of cost-push inflation,” said Dr. Tunde Aluko, a Lagos-based economist.

### Impact on Households and Businesses

The effects of rising inflation are felt across the board.

– **Households**: Food prices, transportation fares, and utility bills have skyrocketed, straining already stretched incomes. Basic food items such as rice, bread, and cooking oil have become significantly costlier, disproportionately affecting low-income families.
– **Businesses**: Small and medium enterprises (SMEs) are scaling back operations due to higher production costs, while larger firms pass these costs on to consumers, exacerbating the inflationary cycle.

### Calls for Intervention

Economists and stakeholders are urging the government to prioritize structural reforms to mitigate the crisis.

– **Boost Local Refining**: Expanding Nigeria’s refining capacity could reduce reliance on costly fuel imports.
– **Improve Power Infrastructure**: Investing in renewable energy and reliable grid systems may lower electricity costs in the long term.
– **Monetary Policy Adjustments**: Stabilizing the naira could ease import-related pressures, particularly for energy and raw materials.

“Nigeria needs a comprehensive approach to stabilize energy costs while ensuring fiscal responsibility,” said Dr. Ngozi Obi, an energy policy analyst.

Government Measures

The Federal Government has acknowledged the inflationary pressures and promised relief measures. Minister of Finance Wale Edun stated that subsidy savings would be reinvested in critical infrastructure, including transportation and energy.

The Central Bank of Nigeria (CBN) is exploring further monetary policy adjustments, though interest rate hikes have had limited success in curbing inflation.

The Road Ahead

Despite ongoing efforts, the inflation outlook remains concerning. Analysts warn that without swift and effective policy action, Nigerians could continue to face rising costs, particularly as global oil price fluctuations and local inefficiencies persist.

For many, the promise of reforms offers hope, but the immediate reality underscores the need for decisive action to alleviate the economic burden on households and businesses alike.