At 34.19%, the inflation rate in June 2024 represented the highest rate since March 1996- the highest for 28 years. Food inflation, which constitutes the bulk of the inflation basket, increased by 40.87% because of price increases in staple foods like bread, cereal, potatoes and fish.
The chart clearly illustrates that the Niara has been the worst-performing Sub-Saharan currency since the beginning of the calendar year. This will ensure that inflation remains high given the high cost of imported goods and the usual consequences of imported inflation.
The hope is that the Dangote refinery will commence supplying the local market with petrol from this month, thus alleviating the local currency’s pressure.
We stand by our original forecast that the average inflation rate for 2024 will be 29.5%.
The continued high inflation, the weakening Niaria and the removal of the fuel subsidies in May 2023 have significantly impacted on employees’ purchasing power. Further, given the forecasts of many economists in the beginning of the calendar year, there is little doubt that most employers would have granted negative salary increases. The impact of a negative salary increase was spelt out in our June 2024 article – “Are your employees in some African countries moaning about salaries?”
One possible remedy could be the introduction of an Inflation Allowance which floats with the prevailing official inflation rate. This concession should be communicated to employees, which will demonstrate that the company is aware of their declining purchasing power and the fact that a negative salary increase was granted but where:
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