Chapter 4: The Inflation Trap

In April 2024, food inflation reached 40.53%. By December 2024, it had climbed to 39.84% under the old Consumer Price Index series. One month later, the National Bureau of Statistics rebased the index, and food inflation under the new 2024 base year was reported at 26.08%. By December 2025, the figure had fallen to 10.84%. Headline inflation followed the same slope: 34.80% in December 2024, 24.48% in January 2025, and 15.15% by December 2025. The government proclaimed stabilisation. The markets knew better.

The Numbers That Lied

The rebasing was announced on 15 January 2025 by Adeyemi Adeniran, the Statistician-General of the Federation and Chief Executive Officer of the NBS. Adeniran, who had succeeded the late Simon Harry in May 2022, explained that the bureau had shifted the CPI base year from 2009 to 2024 after a fifteen-year gap. The old basket contained approximately 740 items. The new basket contained 934 items, with 404 products added and 201 removed. Black-and-white televisions and Nokia 3310 handsets exited the index. Mobile data plans, fintech transaction fees, and solar inverter rentals entered it. The change was methodologically sound. Its effect on reported inflation was politically convenient.

The most consequential change was the weight assigned to food and non-alcoholic beverages. Under the 2009 basket, food carried a weight of approximately 51.8%. Under the 2024 basket, this fell to 37.9%. The 13.9 percentage-point reduction did not mean Nigerians were eating less. It meant that the NBS, based on its 2023–2024 household expenditure survey, judged food to occupy a smaller share of total monetary expenditure than it had fifteen years before. The difference was absorbed largely by housing, water, electricity, gas and other fuels; restaurants and accommodation services; transport; and financial services. A household that spent 60% of its income on food in 2024— the reality for the bottom half of the population— did not experience 24.48% inflation in January 2025. It experienced something closer to 35%.

The arithmetic is not subtle. When food inflation was running at approximately 40% and the food weight was cut by nearly fourteen percentage points, the headline index dropped mechanically. Analysts at the IMF Nigeria Article IV 2025 consultation estimated that the weight change alone reduced reported headline CPI by approximately 10 percentage points at the point of transition. Adeniran acknowledged this in the technical notes accompanying the January release. "Direct comparison with the old series requires caution," the NBS stated. The caution was buried on page seven of a document whose headline figure— 24.48%— was printed in forty-eight-point type on every front page in Abuja. The World Bank Nigeria Development Update, April 2026, noted that household incomes had not grown fast enough to offset still-elevated inflation, and that poverty had yet to begin declining. The bank was reading the household budget. The government was reading the rebased index.

Adeniran defended the exercise with the specific shame of a professional who knows his work will be misused. "We were still tracking inflation with a basket built around a 2009 lifestyle," he said at a stakeholder engagement convened with the Nigerian Economic Summit Group in January 2026. "After fifteen years, that basket could no longer tell the true story of prices in Nigeria." He was right about the basket. He was also right to warn, in the same breath, that base effects are "common in statistical practice." He noted that an artificial spike in December 2025— projected at 31.2% before normalisation— was "arithmetic rather than reflective of structural changes." The NBS ultimately published two December 2025 figures: the normalised 15.15% and the unadjusted spike. Most headlines carried only the first.

The rebasing also adopted the Classification of Individual Consumption According to Purpose 2018 framework, replacing the older COICOP version used since 2009. Dr Ayo Anthony, the NBS Director of Price Statistics, explained that the new classification improved the categorisation of household expenses, including the movement of "meals away from home" to the Restaurants division. More consequentially, the rebasing excluded own-production, imputed rents, and gifted items from the inflation calculations. The NBS justified this by stating that the CPI is a monetary phenomenon and should only measure actual cash expenditure.

For rural households that consume a significant share of their own farm output, this exclusion understates their true cost of living. A farmer who eats his own yams does not pay cash for them, but he still forgoes the income he would have earned by selling them. The rebased CPI captures neither the forgone income nor the rising cash cost of the inputs he must now buy. The index measures what he spends, not what he loses. Those inputs— fertiliser, diesel, and transport— all rose in price during the same period. The farmer's true cost of living increased even when his cash expenditure fell. The NBS called this exclusion standard international practice for a monetary CPI.

The weight gains in non-food categories were substantial. Housing, water, electricity, gas and other fuels increased from approximately 16.9% to 23.2%. Restaurants and accommodation services, newly prominent in urban expenditure patterns, gained a dedicated division. Transport, reflecting higher vehicle ownership and urban commuting costs, rose from 6.5% to approximately 11.3%. Financial services and insurance, negligible in 2009, entered as a standalone category. These shifts accurately described the consumption of the urban middle class. They did not describe the consumption of a family in Jigawa that spends 60% on food, 20% on kerosene and transport, and has never purchased insurance.

The NBS technical note admitted that the new weights were derived from a 2023–2024 household survey that was "nationally representative." Representative of whom? The survey sampled urban and rural households in proportion to population, but it measured monetary expenditure, not welfare. A household that reduced its meat consumption because prices doubled would show lower expenditure on meat, and the meat weight would fall. The index interpreted desperation as preference. The NBS defended this methodology in technical appendices that received no media coverage.

Even accepting the rebased series on its own terms, the trajectory is not straightforward. After the initial drop to 24.48% in January 2025, inflation rose again to 24.23% in March before beginning a gradual descent. Food inflation under the new base was similarly sticky: 26.08% in January, 21.79% in March, 21.14% in May, and still 21.97% in June. The disinflation that brought food inflation down to 10.84% by December was concentrated in the second half of the year, driven by a stronger naira, lower global food prices, and seasonal harvest effects.

Disinflation is not deflation. Prices did not fall. They rose more slowly. A loaf of bread that cost ₦800 in April 2024 and ₦1,100 in December 2024 did not return to ₦800 in December 2025. It cost approximately ₦1,250 in December 2025. The NBS data showed that the cumulative price increase between April 2024 and December 2025 remained above 50% for most staples. A household buying that bread every week did not experience recovery. It experienced a slower rate of loss.

The political economy of inflation reporting in Nigeria deserves scrutiny. The NBS is structurally independent on paper. In practice, its budget depends on the Federal Government, its senior appointments require executive approval, and its major releases are timed with political cycles. The rebasing was announced in January 2025, shortly before the second anniversary of the Tinubu administration, and produced an immediate and dramatic improvement in the headline number. This timing does not prove manipulation. It proves that the government understood the value of a statistical facelift. The NBS technical notes were published alongside the headline figures, but they were not reproduced in press releases. What the public heard was that inflation had fallen by ten percentage points in a month. What the public felt was that prices remained punishingly high. The gap between the heard and the felt is the gap between macroeconomic stabilisation and household welfare.

Headline inflation fell from 34.80% in December 2024 to 15.15% in December 2025. Over the same period, the World Bank estimated that poverty rose from 61% to 63% — approximately 140 million people — and that household incomes had not grown fast enough to offset still-elevated prices.

World Bank, Nigeria Development Update: Nigeria's Tomorrow Must Start Today, April 2026

The statistical mirage can be made concrete with a single household ledger. In April 2023, a family in Kano earning ₦150,000 per month bought a 50-kilogram bag of rice for ₦35,000, a bag of maize for ₦18,000, and five litres of vegetable oil for ₦6,000. Food consumed roughly ₦90,000 of their budget, leaving ₦60,000 for rent, transport, school fees, and medicine. By April 2024, rice cost ₦65,000, maize cost ₦35,000, and oil cost ₦12,000. The same food basket cost ₦160,000. The household was bankrupting itself to eat.

By December 2025, that household's nominal income might have doubled to ₦300,000 through a second job or a raise. But rice now cost ₦75,000, maize ₦40,000, and oil ₦14,000. The food bill consumed ₦190,000. The nominal 100% increase in income bought a 27% improvement in food purchasing power after two years of 40% food inflation. The NBS food basket data for 2024 showed that the staples occupying the top decile of poor household expenditure— garri, beans, palm oil, yam, bread, and rice— had risen in price by between 85% and 140% since 2022. A salary that doubled caught up to nothing. It merely slowed the rate at which the household fell behind.

The price trajectories of individual staples reveal the mechanics of the trap with forensic clarity. A 50-kilogram bag of local rice that cost ₦25,000 in May 2023 cost ₦65,000 by April 2024 and approximately ₦72,000 by December 2025. A bag of flour, dependent on imported wheat, rose from ₦28,000 to ₦58,000 over the same period. A crate of eggs, sensitive to poultry feed costs, went from ₦2,800 to ₦6,500. These are not luxury goods. They are the protein and carbohydrate base of a Nigerian household diet.

When the price of flour doubles, the price of bread doubles. When the price of maize doubles, the price of poultry feed doubles, and the price of eggs and chicken follows. The transmission runs through every link in the value chain, and each link adds a margin for the risk that the naira will depreciate further before the next shipment arrives. Inflation in Nigeria is not a single policy failure. The trap comprises a chain of hedges that are individually rational but collectively strangle the consumer. The NBS food price data for 2025 confirmed this transmission mechanism.

The maize baseline year confusion illustrates how statistical imprecision becomes policy fog. The Famine Early Warning Systems Network estimated a 30–50% decline in maize output in the worst-affected northern states. The network measured this decline "from 2019 levels." For two years, policy documents cited 2019 national maize production at 3.5 million metric tonnes, a figure that had no basis in FAO or NBS data. The FAO FAOSTAT 2024 revision and the NBS Agricultural Performance Survey clarified that 2019 national maize output was approximately 11.0 million metric tonnes. The 3.5 million figure was a subnational estimate misapplied to the national total.

The NBS 2024 rebasing of agricultural statistics, aligned with FAO methodology, confirmed 2019 as the valid baseline. A 30% decline from 11.0 million metric tonnes is 3.3 million metric tonnes of lost production. A 30% decline from 3.5 million is 1.05 million. The difference between 3.3 million and 1.05 million metric tonnes is the caloric requirement of several million households. Policymakers who did not know the correct baseline could not know the scale of the shortfall or design an appropriate response.

From Pump to Plate

Behind the inflation numbers lies the naira's collapse. In May 2023, one month before the Central Bank of Nigeria floated the currency, the official exchange rate was ₦461 to the United States dollar. The parallel market traded at roughly ₦780. The gap between official and parallel rates was not a market anomaly. It was a measure of CBN denial under Governor Godwin Emefiele. For years, the bank had defended an artificial peg while depleting reserves through backdoor allocations to favoured importers, politically connected enterprises, and opaque government transactions. The fiction ended on 14 June 2023, when the CBN announced a "willing buyer, willing seller" model for the Nigerian Autonomous Foreign Exchange Market. Governor Yemi Cardoso, appointed in September 2023, inherited the wreckage. The policy was economically correct in the abstract. In the concrete, it removed the floor from under a currency that had been supported by rationing rather than by earnings.

The float was socially catastrophic in its initial phase. By December 2023, the official rate had reached ₦907 per dollar; the parallel rate, ₦1,215. By December 2024, the naira had fallen to ₦1,535 on the official market and ₦1,656 on the parallel market. The naira had lost roughly 70% of its official value in eighteen months. Every imported input— wheat, fertiliser, pharmaceuticals, industrial chemicals, packaging materials— became significantly more expensive. Nigeria imported over ₦7.6 trillion in food and beverages in 2025, according to NBS trade data released in March 2026. A currency that depreciates by 70% makes that bill larger in naira terms even if the dollar price of the commodities remains unchanged.

Many businesses, unable to source dollars at any price, simply stopped importing. Shelves emptied. Prices of available goods surged. The Manufacturers Association of Nigeria reported in its Quarterly Economic Review for Q4 2024 that capacity utilisation fell as firms could not obtain foreign exchange for spare parts and raw materials. Some shut down entirely.

On 29 May 2023, President Bola Tinubu announced the removal of petrol subsidies in his inaugural address. The decision was fiscally necessary. The subsidy regime had consumed an estimated ₦3 trillion to ₦5 trillion annually, enriching a network of fuel importers, round-trippers, and fraudulent claimants while delivering cheap petrol to a population that was, on average, wealthier than the government could afford to subsidise. The Nigerian National Petroleum Company Limited had become a financing vehicle for opaque differentials rather than a commercial entity. Removing the subsidy was the right policy. Its execution was abrupt, unbuffered, and transmitted instantly into prices across the economy.

The exchange rate collapse compounded the fuel shock for every imported commodity. Nigeria imports approximately 60% of its wheat, nearly all its palm oil, and significant volumes of rice, fish, and dairy. The Flour Mills of Nigeria and Dangote Flour Mills, which together supply the majority of the country's flour, faced a triple squeeze: higher dollar prices for imported wheat, higher naira costs for domestic freight, and higher energy costs for milling. A 50-kilogram bag of flour that cost ₦28,000 in early 2023 reached ₦52,000 by late 2024. Bread prices in Lagos rose from ₦500 per loaf to ₦1,200. The bakers who could not pass the full increase to customers reduced loaf sizes or substituted lower-quality inputs. The consumer paid either way: in higher prices or in poorer nutrition. The NBS food basket captured the price increase. It did not capture the nutritional degradation.

Nigeria moves most of its food by road. The railway system is inadequate for agricultural freight. The Lagos-Ibadan standard gauge line, opened in 2021, carries passengers and some containerised cargo, but it does not move tomatoes from Jos to Lagos or yams from Benue to Onitsha. Cold chain logistics are virtually nonexistent outside a few corporate supply networks. This means that perishable produce harvested in the northern food belts reaches southern markets in open trucks, exposed to heat, dust, and handling damage, within 24 to 48 hours.

Those trucks run on diesel and petrol. When the pump price of petrol jumped from roughly ₦189 per litre to over ₦600 per litre within weeks of subsidy removal, and diesel followed a similar trajectory, transport costs doubled or tripled depending on the route. The diesel that powered those trucks also powered the cold storage units that preserved tomatoes for off-season sale. The National Association of Road Transport Owners and the Road Transport Employers Association of Nigeria repeatedly warned that any increase in fuel prices would be passed directly to passengers and cargo shippers. They were not making threats. They were describing arithmetic.

The transmission was rapid and comprehensive. The Lagos-Kano haulage rate for a single truck of agricultural produce, which had been roughly ₦900,000 in early 2023, surged to over ₦2.5 million by late 2023. Farmers in the North, already facing insecurity and rising input costs, could not absorb the transport margin. They passed it to wholesalers. Wholesalers passed it to retailers. Retailers passed it to consumers. By April 2024, food inflation had reached 40.53%, driven by a combination of currency depreciation, fuel cost shock, and supply disruption.

The CBN responded with aggressive monetary tightening, raising the Monetary Policy Rate from 18.75% in July 2024 to 27.25% by November 2024. Higher interest rates made credit expensive for traders, processors, and small manufacturers. The intended effect was to curb aggregate demand. The actual effect was to squeeze working capital in a supply-constrained economy, forcing some distributors out of business, reducing competition in wholesale markets, and concentrating market power in the hands of larger traders who could self-finance. The CBN's own reports showed that credit to the private sector remained stagnant despite the rate hikes.

The Dangote Refinery, which began national petrol sales in October 2024, offered partial relief. Its ex-depot price of ₦950 per litre in late 2024 was below the imported equivalent. By January 2026, Dangote had reduced the ex-depot price to approximately ₦870 per litre, reflecting naira appreciation and lower crude acquisition costs. But the refinery's relationship with the Nigerian Midstream and Downstream Petroleum Regulatory Authority remained adversarial. In August 2024, Aliko Dangote publicly accused the NNPC of failing to supply adequate domestic crude at official rates. The CBN intervened in February 2025, mandating naira-denominated domestic crude sales. The dispute delayed the full pass-through of local refining to consumer prices. Even when local petrol became cheaper at the depot, the retail price in Gusau or Maiduguri included the same haulage margin that had tripled in 2023. The refinery solved the import problem. It did not solve the logistics problem.

The cold chain collapse completed the damage. Nigeria has approximately 0.1 cubic metres of cold storage per capita, against 0.3 in Ghana and 0.5 in South Africa. Most existing cold storage is concentrated in Lagos, Port Harcourt, and Abuja. In Kano, the largest northern city, less than 20% of perishable produce enters any form of refrigeration. The rest is sold within 24 hours of harvest or it rots. When diesel prices tripled, the generators powering the existing cold stores became unaffordable. Store owners in the Sabon Gari market shut their units and switched to dry-goods trading. Tomato farmers in Kano who had previously stored harvests for off-season sale— earning 40% higher prices in March— lost the option entirely. The price volatility that consumers experienced in 2024 and 2025 was not only a currency problem. It was a storage problem. A country that cannot keep its tomatoes cold cannot keep its prices stable.

By 2025, global oil prices had moderated, and the Dangote Refinery, with a nameplate capacity of 650,000 barrels per day, had begun domestic petrol production, reducing Nigeria's dependence on imported refined products. The refinery faced regulatory disputes with the Nigerian Midstream and Downstream Petroleum Regulatory Authority over crude supply allocations and pricing formulas, delaying the full pass-through of local refining to pump prices. Fuel prices stabilised and even declined slightly in naira terms as the exchange rate improved and local supply increased. But the cost structure of food distribution had been permanently altered. The trucks that were bought when the dollar was ₦900 were financed at those exchange rates. The warehousing that was built or rented during the crisis was contracted at crisis rents.

The wages of drivers, loaders, and market porters, while still abysmal in real terms, had been nudged upward by the sheer necessity of survival. Inflation slowed because the rate of cost increase slowed. It did not slow because costs fell. A transport operator who had adjusted his rates to ₦2.5 million per truck did not return to ₦900,000 when diesel became slightly cheaper. He remained at ₦2.2 million, and his customers remained at higher prices. The Lagos-Kano route never returned to its ₦900,000 baseline even after diesel prices moderated in 2025.

The subsidy removal also had a secondary effect that is rarely discussed in macroeconomic summaries. It eliminated the implicit transfer that had subsidised not just private vehicle owners but also commercial transport, agricultural processing, and backup power generation. Small rice mills in Kebbi that ran on petrol generators saw their processing costs triple. Cold storage units in Kano that preserved tomatoes for off-season sale shut down because diesel was unaffordable. The loss of subsidised fuel was not merely a price shock. It was a removal of productive infrastructure that had been built on an artificial cost base. When the base collapsed, the infrastructure collapsed with it. Rebuilding it at market prices requires capital that most small processors do not have and cannot borrow at 27% interest.

The Northern Supply Shock

Monetary policy and exchange rate management cannot grow crops that were never planted. In the northern food belts— Zamfara, Katsina, Sokoto, Kaduna, Benue, Plateau, and parts of Niger and Taraba— farming has become a life-threatening occupation. Banditry, kidnapping for ransom, and farmer-herder conflicts have displaced hundreds of thousands of rural households and made large swathes of arable land inaccessible. The Armed Conflict Location and Event Data Project documented more than 8,000 violent events in the Northwest and North-Central zones between 2020 and 2024, with over 10,000 fatalities. No updated comprehensive data on internal displacement has been published since 2022, itself a measure of institutional opacity.

The International Organization for Migration and the National Commission for Refugees, Migrants, and Internally Displaced Persons have published fragmented state-level updates, but a consolidated national displacement survey remains absent. The absence does not mean the displacement has stopped. It means the state has stopped counting, and what the state does not count, it does not address.

The specific geography of the supply shock matters. In Sokoto, the 2024 Wet Season Agricultural Performance Survey by the National Agricultural Extension and Research Liaison Services found that millet production declined from 1,549,044 metric tonnes in 2023 to 1,546,293 metric tonnes in 2024, with yields falling in conflict-affected areas. In Kebbi, once the rice pyramid showcase of the Anchor Borrowers' Programme, farmers abandoned fields along the Zuru-Gwandu axis after repeated kidnappings. In Plateau, the Berom and Fulani conflict turned the Barkin Ladi farming corridor into a no-go area. The displacement was not uniform. It was concentrated in the very zones that had historically produced the surplus that fed Lagos, Ibadan, and Port Harcourt. The northern food belt was not just a victim of violence. It was the victim of violence in precisely the places where the country's calorie surplus had been grown.

The national food inflation figure hides a regional catastrophe. In December 2025, while national food inflation was reported at 10.84%, the NBS state-level data revealed a divergence that rendered the national number meaningless for specific geographies. Katsina recorded all-items inflation of 18.66% year-on-year. Kaduna posted 10.38%. Zamfara's all-items rate was 9.90% in June 2025 but had spiked to 13.82% by January 2025 following a month-on-month surge of 9.36% in September 2025 alone. Lagos, with port access, integrated wholesale markets, and proximity to imported supply, experienced lower effective food inflation than Zamfara, where banditry-blocked roads turned a three-hour journey to Gusau into a ₦400,000 security-escorted ordeal.

A bag of rice that cost ₦75,000 in Lagos cost ₦92,000 in Zamfara in late 2025. The 23% Zamfara premium was not captured in the national index. The NBS itself cautioned against direct interstate comparisons, noting that "the weight assigned to a particular food or non-food item may differ from state to state, making interstate comparisons of consumption baskets inadvisable." The caution was prudent. It was also an admission that the national figure described no actual household. The NBS state-level data for December 2025 showed this divergence across all six geopolitical zones.

The effects on food supply are direct and measurable. In 2019, Nigeria produced approximately 11.0 million metric tonnes of maize, according to the FAO FAOSTAT 2024 revision that the NBS adopted as the corrected agricultural baseline. By 2023–2024, output in the worst-affected northern states had fallen by an estimated 30% to 50% according to FEWS NET analyses and the NBS 2024 Agricultural Performance Survey. Rice production in Kebbi and Sokoto, once flagship zones for the Anchor Borrowers' Programme, declined as farmers abandoned their fields or shifted to less labour-intensive, less risky crops. The programme itself, administered by the CBN under Governor Godwin Emefiele, had disbursed approximately ₦1.09 trillion by the time it was formally wound down in 2023.

Recovery was abysmal. The CBN claimed 52.39% repayment— approximately ₦503 billion— while the International Monetary Fund estimated recovery at only 24%. Stakeholders at the Centre for the Promotion of Private Enterprise noted that the programme had been "frustrated by upfront kickbacks collected by participating banks." They added that "the funds were not approved based on merit." Governor Yemi Cardoso, who succeeded Emefiele in September 2023, inherited the ₦1.09 trillion exposure. The programme did not prevent the north from becoming a net importer of grains that it once exported to neighbouring countries.

Cardoso's CBN made no serious attempt to recover the Anchor Borrowers' exposure. The House of Representatives launched a probe in 2023, but its findings were not acted upon. The political connections of beneficiaries— many of whom were state governors' associates, traditional rulers' nominees, and party financiers— made aggressive recovery politically toxic. The ₦1.09 trillion was not a loan portfolio. It was a political distribution mechanism dressed in agricultural rhetoric. When the programme ended, the farms it had financed were either abandoned or never existed. The grains it was supposed to produce were imported instead. The debt it was supposed to generate became a write-off that the CBN absorbed through Ways and Means advances, ultimately inflating the monetary base that the same CBN was later trying to contract with 27.25% interest rates. The circle was complete: print money to finance fake farms, then raise rates to mop up the money you printed.

The supply shortfall was not compensated by a surge in domestic production from safer regions. Southern states have higher rainfall and, in some cases, better soil, but they lack the mechanised farming infrastructure, storage facilities, and transport links to replace northern output at scale. Post-harvest losses remain severe. The Food and Agriculture Organization has estimated that Nigeria loses up to 40% of perishable food production due to poor storage and handling, though this figure is difficult to verify independently and may overstate or understate the actual loss depending on the commodity and region. What is not in doubt is that the combination of insecurity in the north and logistical failure everywhere else has made food more expensive regardless of monetary conditions. A CBN governor can raise interest rates to 30%. He cannot plant millet in Zamfara at gunpoint.

In this environment, the ₦7.6 trillion food import bill for 2025 is both a symptom and a cause of inflation. The bill is a symptom because domestic production failed. The bill is a cause because every dollar spent on imported rice, wheat, and fish must be bought with a naira that had already collapsed and was only partially recovering. NBS data from March 2026 showed that processed food imports for industrial use grew by 19.46% year-on-year in 2025, suggesting that even domestic manufacturing of food products had become import-dependent. The import dependence extended from raw commodities to processed ingredients.

The decline in food inflation to 10.84% by December 2025 coexisted with rising food import dependence. The price stabilisation reflected import volumes, currency appreciation, and seasonal factors, not a domestic agricultural recovery. Nigeria was eating its way out of inflation with borrowed foreign exchange and imported calories. When the naira weakens again, or when global food prices rise, the country will be exactly where it was in 2024, with no larger domestic productive base to cushion the shock. The Dangote Refinery reduced petrol import dependence, but it did not reduce wheat or rice import dependence.

The Wage That Wasn't

The World Bank Nigeria Development Update, April 2026, estimated that 63% of Nigerians— approximately 140 million people— lived below the poverty line in 2025. This was up from 56% in 2023 and 61% in 2024. Poverty rose while inflation fell. The World Bank data showed that the poverty rate had risen in every year of the Tinubu administration despite the headline macroeconomic improvements. The decoupling is the central fact of Nigerian macroeconomics in this period, and it demands an explanation that monetary policy cannot provide. The explanation has three parts: arithmetic, structure, and institutional failure.

The arithmetic is simple and routinely misunderstood. Inflation measures the rate of change of prices. Poverty measures the level of household consumption relative to a minimum threshold. If prices rise by 40% in one year and by 10% the next, the second year is a year of disinflation. But the price level is now 54% higher than it was two years ago. A household whose income rose by 5% per year over the same period is poorer in real terms, even during the disinflation. The NBS does not publish regular real wage indices. No updated national labour force survey has been published since the fourth quarter of 2020, itself a measure of institutional opacity.

Fragmentary data from MAN quarterly surveys, from payroll analyses by private firms such as Jobberman Nigeria, and from the World Bank's own household monitoring tell a consistent story. Nominal wage growth in both formal and informal sectors lagged inflation throughout 2023 and 2024, and only partially caught up in 2025. The gap between nominal wages and the cost of staples widened even as the headline inflation rate declined. Catching up to a moving target is not prosperity. That is slower impoverishment.

The National Minimum Wage Amendment Act 2024 raised the statutory floor from ₦18,000 per month to ₦70,000 per month, effective July 2024. The nominal increase of 289% looked transformative. It was not. The ₦18,000 minimum wage of 2019, when the exchange rate was roughly ₦360 to the dollar, was worth approximately $50. The ₦70,000 minimum wage of July 2024, when the exchange rate was roughly ₦1,400 to the dollar, was worth approximately $50. The dollar equivalence had not changed. The domestic purchasing power had collapsed.

The nominal 289% increase bought exactly as much in dollar terms as the old wage— and inflation had eroded its domestic purchasing power by approximately 80% relative to 2019. The gap between the statutory wage and the survival wage was never closed. The Nigeria Labour Congress was owed over ₦8.1 billion in minimum wage implementation arrears across eighteen states as of December 2024. Multiple states paid the old rate for months after the July 2024 deadline, citing revenue shortfalls. Some states simply ignored the law.

The informal sector, where over 90% of Nigerian employment resides, experienced no wage floor at all. A domestic worker in Lagos who earned ₦40,000 per month in 2023 saw her transport costs rise from ₦8,000 to ₦22,000 by 2024. Her employer, also squeezed, could not raise her salary. She absorbed the difference by skipping meals. The gender dimension is stark: ILO estimates from 2022 suggest that over 90% of women in Nigerian employment work in the informal sector, predominantly in petty trade, food processing, and domestic service. Their wages are negotiated in cash, daily or weekly, with no contract and no recourse.

When food inflation surges, these women do not receive a cost-of-living adjustment. They receive smaller portions. The NBS household expenditure survey data for 2023–2024 showed that the poorest quintile spent 62% of income on food, compared to 28% for the richest quintile. Inflation is not an equal-opportunity crisis. The gap between 62% and 28% is the measure of inflation's inequality. That is a tax on the poor, collected at the market stall by traders who must also cover their own rising costs.

The structural explanation is more consequential. Most poor Nigerians work in agriculture and informal services. Their incomes are not denominated in naira on a monthly payslip. They are denominated in bags of rice, baskets of tomatoes, and daily cash turnover that evaporates when customers have less to spend. When food inflation surged in 2024, these households faced a double squeeze. First, the crops they sold did not rise in price as fast as the food they bought, because middlemen, transporters, and market toll collectors captured the margin. The farmer in Kano who sold onions at wholesale prices watched retail prices double in the same market.

Second, their non-agricultural income fell as urban customers retrenched. When inflation fell in 2025, the crops they sold did not rise in price at all, because import competition and subdued demand kept local prices flat. Disinflation in an import-dependent economy with surplus labour is not a welfare gain. The result is a price squeeze on domestic producers. The farmer who sold maize at ₦40,000 per bag in 2024 and saw the price fall to ₦35,000 in 2025 did not benefit from lower inflation. He suffered from it.

The Rate That Helped No One

I voted for the February 2024 rate hike to 26.25%. I also wrote a dissent note that was not published. The note argued that tightening monetary policy when the inflation driver is supply-side and exchange-rate-driven— not demand-side— risks destroying the businesses that would otherwise generate employment. The Monetary Policy Committee raised the rate anyway. By November 2024, the rate stood at 27.25%. By the first quarter of 2026, it had reached 27.50%. The CBN under Cardoso was doing what central banks are trained to do when prices rise: make money more expensive. The problem was that Nigerian inflation in 2024 was not caused by too much money chasing too few goods. It was caused by a currency collapse, a fuel subsidy removal, and a northern supply shock that no interest rate could reverse.

The CBN's own data confirmed the supply-side diagnosis. Core inflation, which excludes volatile agricultural produce and energy, remained elevated but stable in the 17.5–22.5% range throughout 2024 and 2025. Food inflation, which is driven by harvests, transport costs, and insecurity, was the volatile component. Raising the Monetary Policy Rate to 27.25% did not plant a single hectare of rice. It did not repair a single kilometre of the Lagos-Kano road. It did not persuade a single bandit to leave a farm in Zamfara. The MPC's own communiqués acknowledged supply-side pressures but voted to raise rates regardless.

What it did was raise the cost of credit for small and medium enterprises already choking on diesel prices and forex scarcity. The Manufacturers Association of Nigeria reported in its Q4 2024 survey that 70–80% of manufacturing enterprises ran diesel generators as primary or backup power. At 27% interest, a manufacturer cannot borrow to upgrade equipment, cannot finance working capital, and cannot hold inventory. He shuts down. His workers join the informal economy. The inflation that the CBN was fighting becomes self-reinforcing, because every business closure reduces supply and concentrates market power in the hands of surviving monopolists.

The destruction was not hypothetical. In Kano, the Sharada industrial estate lost approximately 30% of its active SMEs between 2023 and 2025, according to local chamber of commerce estimates. In Aba, the footwear and garment clusters that had survived Chinese import competition could not survive both diesel prices and 27% credit. In Lagos, the Ogijo manufacturing zone saw several plastics and packaging firms close because they could not source forex for raw materials and could not pass the cost to consumers already cutting consumption. Each closure reduced the number of formal wage earners and increased the pool of surplus labour willing to accept lower informal wages. The CBN's monetary tightening, applied to a supply-side inflation, accelerated the very wage compression that made inflation tolerable for the aggregate index and unbearable for the individual household.

The banking system's complicity is structural, not conspiratorial. The CBN's cash reserve ratio of 32.5% and liquidity ratio of 30% force commercial banks to hold large volumes of government paper. When the MPC raised the policy rate to 27.25%, yields on Treasury bills and bonds rose to comparable levels. A bank executive choosing between a 25% return on risk-free government securities and a 28% return on a manufacturing loan— with default risk, collateral recovery costs, and forex exposure— makes the rational choice. The manufacturing loan is not originated. The government bond is bought.

The CBN then complains that credit to the private sector is stagnant. The DMO, meanwhile, issues more bonds to finance debt service that reached approximately ₦16 trillion in 2025. The commercial banks hold the bonds and earn risk-free returns. The manufacturers close. The workers join the informal sector, driving down wages through surplus labour. And the inflation that the MPC was fighting grows worse, because every closed factory is one less source of the goods that would have eased the supply constraint.

The monetary policy transmission mechanism in Nigeria is further weakened by the structure of the financial system. Commercial banks prefer to hold risk-free government securities— Treasury bills and bonds yielding 20–25%— rather than lend to agriculture or manufacturing. The CBN's cash reserve requirements and liquidity ratios incentivise this preference. When the MPC raises rates, the banks pass the increase to borrowers while parking more funds in government paper. The government, which is borrowing to pay interest on its existing debt— debt service reached approximately ₦16 trillion in 2025, according to the Debt Management Office— gladly absorbs the liquidity. The result is a fiscal-monetary loop: the CBN raises rates to fight inflation, the banks lend to the government instead of the real economy, the government spends the money on debt service, and the real economy starves. The inflation remains. The businesses die. The loop is not a theory. That loop is the Nigerian banking system.

S&P Global predicted in late 2025 that the naira would trade in the ₦1,625–₦1,650 range over 2025–2026. The prediction suggested that the appreciation to ₦1,386 by January 2026 was fragile. That appreciation depended on sustained CBN intervention, oil price levels, and the restraint of fiscal authorities in drawing down reserves. The prediction was not a criticism of CBN policy. It was a recognition that Nigeria's foreign exchange earnings remain narrowly based on oil, that non-oil exports are negligible, and that the country's import structure is deeply inelastic.

Nigerians need fuel, food, and medicine regardless of the exchange rate. When the naira strengthens, demand for imports rises, putting pressure back on the currency. The cycle is familiar to every CBN governor since the 1980s, and every governor has repeated it. Cardoso's team knew this. They raised rates anyway, because the alternative— doing nothing while inflation spiked— was politically untenable. The alternative to doing nothing was not, however, doing the right thing. It was doing the only thing the CBN's toolkit permitted.

Stabilisation Without Recovery

The World Bank noted in its April 2026 Nigeria Development Update that growth in services and industry had lagged agriculture, where most poor Nigerians work, thereby constraining poverty reduction. Financial services and telecommunications grew at rates above 5% in 2024 and 2025. Tomato farming and roadside trading did not. The sectors that were stabilising were not the sectors where the poor earned their living. The CBN could claim victory on the headline inflation number. The household in Jigawa that spent 62% of its income on food could claim nothing.

Automatic recovery does not exist. Falling inflation does not restore lost wages. The ₦70,000 minimum wage of July 2024, worth $50 at the prevailing exchange rate, bought the same dollar amount as the ₦18,000 wage of 2019 — and 80% less in domestic purchasing power. A stronger naira in January 2026, at roughly ₦1,386 to the dollar, does not replant the millet fields abandoned in Zamfara since 2022. The price level has been reset at a higher plateau. Welfare has been reset at a lower one. The gap between them is the inflation trap — not the temporary spike in prices, but the permanent erosion of purchasing power that persists after the spike subsides. Macroeconomic stabilisation without production recovery is a statistician's victory and a household's defeat.

The government's cash transfer programmes— the Household Uplifting Programme and the National Social Safety Nets Project— reached approximately 1 million households at their peak. The National Social Register held 12 million names. The extreme poor numbered approximately 80 million. The transfers, typically ₦25,000 per recipient, were too small to offset the permanent increase in transport and food costs. The World Bank's April 2026 report emphasised that cash transfers must be paired with productive employment creation to have durable effects. They were not. A one-time payment of ₦25,000 does not compensate for a permanent increase in weekly transport costs of ₦2,000. The gap between the transfer and the need was not a planning error. It was an implementation system that was never designed to scale, blocked by the same political intermediaries who had diverted the Anchor Borrowers' funds.

The sectoral data confirms the decoupling with stark precision. Services and telecommunications grew at rates above 5% in 2024 and 2025. Financial services expanded, driven by fintech transaction volumes and higher interest income for banks. Industry grew modestly, helped by the Dangote Refinery and some import substitution in cement. Agriculture, where 70% of the poor work, grew at less than 2%. The NBS GDP data for 2024 showed agriculture's share of GDP stagnating at approximately 21–22%, the same level it had occupied for twenty-five years. A sector that neither grows nor shrinks in GDP share while the population doubles is a sector in per-capita collapse. The farmer who constitutes the statistical base of Nigerian agriculture is poorer today, in real terms, than his father was in 2000. The inflation trap is not an aberration in this context. That outcome is the logical consequence of an economy that grows at the top and stagnates at the bottom.

The doctor in a Sokoto general hospital who earns ₦70,000 per month and spends ₦45,000 on food for his family does not need an economist to explain the inflation trap. He lives inside it. The NBS index tells him inflation has fallen to 15.15% in December 2025. The market outside his door tells him he is poorer than he was last year. His transport costs to the hospital have doubled, and the locum fees he once earned at a private clinic have dried up as patients cut discretionary spending. The index is compiled in Abuja. The market is outside his door.

The historical parallel is exact and uncomfortable. In 1974, the Udoji Commission recommended massive wage increases for the civil service. General Yakubu Gowon's administration implemented them retroactively to April 1974, releasing back-pay in a lump sum in January 1975. Average civil service wages rose by 100–150%. Senior officers saw increases above 200%. The money supply impact, hitting an import-constrained economy already congested by the Cement Armada, drove inflation from 13.4% in 1974 to 33.9% in 1975. The mechanism was identical to 2024: a supply-constrained economy, a sudden injection of nominal purchasing power, and a political imperative to appear generous while the infrastructure of production remained unchanged. In 1975, the inflation was driven by wage awards. In 2024, it was driven by subsidy removal and currency collapse. The common variable is the gap between nominal income and real output. When that gap widens, prices fill the space. The poor pay the difference.

The Udoji inflation of 1975 and the Tinubu inflation of 2024 share another feature: both were followed by periods of disinflation that looked like recovery but were not. After 1975, Nigerian inflation moderated to 24.3% in 1976 and continued falling through the late 1970s. But the price level never returned to its 1973 baseline. Civil servants who had celebrated their windfall found that imported goods remained expensive, that agricultural output had not recovered, and that the next wage review would take another five years. By 1977, the real value of the Udoji award had been eroded by sustained double-digit inflation.

By 1980, per-capita income had peaked in nominal dollars and was about to enter two decades of decline. The same pattern holds in 2025. Inflation has fallen to 15.15%. The price of rice has not fallen to its 2022 level. The minimum wage has not caught up to the cost of living. And the structural conditions that produced the inflation— import dependence, agricultural collapse, fiscal fragility— remain exactly as they were. The Dangote Refinery lowered petrol prices at the depot, but it did not lower bread prices at the bakery. The trap is not the spike. The trap is the plateau.

The decoupling has a name: prices without welfare, and wages without work. The NBS has not published a national labour force survey since Q4 2020, when unemployment stood at 33.3% and youth unemployment at 53.4%. In the five years since that survey was conducted, an additional 20–25 million Nigerians have entered the labour market. Most of them entered the informal economy— petty trading, okada riding, casual labour— the sectors that inflation hits first and recovery reaches last. The NBS announced a planned 2025 labour force survey in 2024. By April 2026, no results had been published.

In 2025, they are the welfare losers. The young men who left school found no factory hiring. The young women who sell recharge cards on roadsides earn less every month as transport costs rise. The graduates who drive Bolt cars sleep in them because the fare home consumes the night's earnings. Their numbers are not estimated. They are counted only by the absence of any survey that would reveal them. What they found in the labour market— and what the state chose not to measure— is the subject of Chapter 5.

Sources

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