Proposed Hike In Telecom Tariff Will Worsen Inflation, Experts Warn

Some financial experts have said that the inflation rate may decrease in the coming months if factors such as energy prices and security improve.

Nigeria’s headline inflation rate dropped to 34.80 per cent in December 2024, despite seasonal consumption increases, particularly in food,

In an exclusive interview with THE WHISTLER, the experts explained that December’s inflationary spike aligns with historical trends, where higher consumption levels especially during the festive period tend to drive up prices.

Nigeria’s headline inflation rate saw a slight increase, reaching 34.80 per cent in December 2024, according to the National Bureau of Statistics (NBS).

This represents a modest rise of 0.20 per cent compared to the 34.60 per cent recorded in November 2024, largely driven by heightened demand for goods and services during the festive season.

Additionally, the December 2024 inflation rate was 5.87 per cent higher than the 28.92 per cent recorded in December 2023.

The experts noted, however, that challenges such as rising food prices and proposed telecom tariff hikes could hinder progress in the short term.

Reacting to the figures, Nigeria’s first Professor of Capital Market, Professor Uche Uwaleke stated that the drop in inflation was not unexpected.

However, he expressed optimism about the trajectory of inflation in the coming months, asserting that the December figure of 34.80 per cent likely represents the peak.

Looking ahead, he anticipated that Nigeria’s inflation rate for January 2025 would show a decrease compared to December, driven by lower consumption levels post-festivities and a favorable base effect from the previous year.

He also suggested that this decline could signal the onset of disinflation, a trend where inflation gradually slows down.

The shift, according to Uwaleke, may lead to a change in the Central Bank of Nigeria’s (CBN) current monetary policy stance, which has been focused on tightening to control inflation.

Managing Director/CEO of Arthur Stevens Asset Management Limited and former President of the Chartered Institute of Stockbrokers, Mr. Olatunde Amolegbe, also commented on Nigeria’s recent inflationary trends, acknowledging the expected rise in inflation.

Amolegbe highlighted two key factors influencing inflation in the country: lower energy costs and rising food prices. While the decline in energy prices may have contributed to easing inflationary pressures, he pointed out that increasing food costs continue to be a major driver of inflation, negatively affecting the overall rate.

Looking to the future, Amolegbe suggested that a sustained reduction in insecurity across the country, and continued declines in energy prices, could potentially provide the necessary conditions for the Monetary Policy Committee (MPC) to consider lowering interest rates.

Such a move, he believes, could ultimately help bring inflation down in the months ahead, providing some much-needed relief for Nigerian consumers and businesses alike.

However, Amolegbe also cautioned that the current inflation rate remains uncomfortably high, and the proposed increase in telecommunications tariffs could exacerbate the situation in the short term.

The combination of persistently high inflation and rising costs of essential services such as telecommunications could present additional challenges for the economy.

The Managing Director of Highcap Securities, Mr. David Adonri attributed the persistent rise in inflation during the festive season to deeper structural challenges within Nigeria’s economy.

Speaking on the inflation trends observed in December 2024, Adonri noted that while the month is historically associated with price hikes due to increased demand for celebrations, the underlying causes extend far beyond seasonal factors.

“December is typically notorious for inflation spikes as business owners increase prices to meet the surge in demand for festive activities,” Adonri stated.

However, he emphasized that the continued rise in inflation reflects systemic economic deficiencies that have remained unaddressed for years, undermining the effectiveness of contractionary monetary policies.

“These structural failures are at the core of the inflation problem. The dislocations in production and trade, combined with monetary imbalances, have created a situation where inflation persists despite policy interventions,” he added.

Looking ahead, Adonri expressed cautious optimism about achieving the Central Bank’s target of a 15 per cent inflation rate by 2025. However, he underscored the need for comprehensive and urgent reforms to address the root causes of the inflation crisis.

“If these structural issues are tackled seriously, there is a realistic chance of meeting the inflation target,” he concluded.

Proposed Hike In Telecom Tariff Will Worsen Inflation, Experts Warn is first published on The Whistler Newspaper