essay on inflation in nigeria

Inflation in Nigeria is still climbing while it has slowed globally: here’s why

Professor of Economics & Business, Allegheny College

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Just as Nigerians were gradually digging out from the devastating effects of the COVID-19 pandemic , they were hit by high inflation .

The Nigerian economy contracted by 6.1% at the peak of COVID in the second quarter of 2020. Unemployment rate rose from 27% in the second quarter of 2020 to 33% in the fourth quarter of the same year.

The World Bank estimated that 11 million Nigerians were pushed into poverty during the pandemic, in addition to the 100 million (out of 200 million people in the country) who were already classified as poor.

Now, Nigerians have to grapple with unprecedented inflation too.

Read more: Nigeria's food inflation: losers, winners and a possible solution

Nigeria’s inflation rate rose to 29.90% in January 2024, from 28.92% in December 2023. This is the highest it has been in two decades.

Global inflation has reached historic levels during the past three years. The International Monetary Fund expects global inflation to fall, however, from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.

The US and the EU have seen inflation decline during the past few months, prompting central banks to pause interest rate hikes.

In fact, central banks in developed countries are expected to begin reducing interest rates this year.

So why is inflation rising in Nigeria while it has been declining in other parts of the world?

As a development economist who has been studying the Nigerian economy for over four decades, I argue in this article that the factors that are pushing inflation downward in other parts of the world are moving in the opposite direction in Nigeria.

I also suggest that no single factor can adequately explain rising inflation and escalating food costs in Nigeria. Nigeria’s unprecedented inflation is a case of multiple factors interacting to trigger cost-push inflation .

If not addressed urgently, Nigeria’s rising inflation could result in “ stagflation ”. This is when the lack of robust economic growth is combined with hyperinflation.

With high numbers of unemployed people who must purchase basic necessities at very high prices, Nigeria risks widespread protests, social tensions and political instability.

Read more: Nigeria's food insecurity: declaring a state of emergency isn't a real solution - here's what is

Fuel prices

Declining oil prices , caused by a slow post-pandemic economic recovery, are causing freight prices to fall, which in turn has lowered production costs and consumer prices in many countries.

But Nigerians are not benefiting from the global decline in oil and natural gas prices. Rather, they are paying substantially more at the pump because of the removal of fuel subsidies.

Fuel prices soared , from N557 (US$0.35) to N617 (US$0.39) per litre, after the removal of the subsidy in May 2023.

In other words, while falling oil and natural gas prices are reducing production costs in other countries, costs are rising in Nigeria.

A World Bank study found that complete removal of fuel subsidies, except kerosene subsidies, increases economy-wide prices by 3.4%.

Read more: Nigeria’s fuel subsidy is gone. It's time to spend the money in ways that benefit the poor

Supply constraints and inflation

Another factor that is causing global inflation to decline is the easing of pandemic-era supply chain bottlenecks, which has occurred faster than expected.

Nigeria, however, continues to endure supply constraints because of the floating of the local currency, the naira. Floating the naira means its value will from now on be determined by market forces of demand and supply, or what the Central Bank of Nigeria refers to as “the willing seller, willing buyer” exchange rate .

The central bank previously adopted a “ managed floating ” policy, whereby it periodically adjusted the official exchange rate. But the adjustment criteria were considered to be too opaque and un-reflective of market fundamentals.

The naira depreciated by 69% between June 2023 when the foreign exchange market was liberalised and the middle of February 2024.

Currency depreciation has increased import costs. Nigeria is an import-dependent economy, and Nigerian importers are purchasing goods at prices that are already very high abroad. The costs of these goods have also gone up because of higher tariffs caused by the depreciation of the naira.

For instance, only 1% of the roughly six million metric tonnes of wheat that Nigeria consumes annually is produced domestically. The war in Ukraine has raised food prices in Nigeria, as the country imports wheat from Russia and Ukraine, in addition to fertilizers from Russia.

Thus, much of Nigeria’s inflation is caused by a combination of oil subsidy removal and devaluation of the naira. Making it worse are longstanding supply constraints like instability in food-producing areas of the country, deteriorating rural infrastructure, climate change and the exodus of rural dwellers to urban centres in search of opportunities.

Food inflation in Nigeria also reflects low productivity in the agricultural sector. Output has failed to keep up with population growth. Nigeria’s population has been growing by about 2.4% a year, while the growth of agricultural value added is a paltry 1.8% .

Read more: Nigeria's new foreign exchange policy is good news - but it can't work wonders for the economy on its own

Uncertain inflationary outlook

Inflation is cooling globally partly because of the restrictive monetary and fiscal policies of many countries across the world. Central banks hiked interest rates aggressively and many governments cut spending.

Nigeria’s Central Bank governor Olayemi Cardoso expects Nigeria’s inflation rate to decline to 21.4% in 2024, following interest rate increases and rising agricultural productivity.

But I don’t expect a steep fall in Nigerian’s inflation this year.

First, inflation-targeting policies have lagged effects, and usually take time to make a difference to consumer prices.

Second, many prices are typically “sticky” downward. Once they go up they don’t come down – or only very gradually.

Lastly, Nigeria’s inflation targeting policy can only be effective if it is coupled with fiscal discipline by the executive and legislative branches of government. There is no evidence this has been the case so far under the Bola Tinubu administration.

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The Main Determinants of Inflation in Nigeria

• Published: 01 June 1995
• Volume 42 , pages 270–289, ( 1995 )

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• Gary G. Moser  

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This paper analyzes the dominant factors influencing inflation in Nigeria. An error correction model of the inflation process is developed based on money market equilibrium conditions. The results of this analysis confirm the basic findings of earlier studies, namely, that monetary expansion, driven mainly by expansionary fiscal policies, explains to a large degree the inflationary process in Nigeria. Other important factors are the devaluation of the naira and agroclimatic conditions. It was found that concurrent fiscal and monetary policies had a major influence on the impact of the depreciation of the naira on inflation.

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Moser, G. The Main Determinants of Inflation in Nigeria. IMF Econ Rev 42 , 270–289 (1995). https://doi.org/10.2307/3867573

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External Debt, Domestic Debt and Inflation in Nigeria: A Multivariate Granger-Causality Test

• Akingbade U. Aimola University of South Africa, South Africa
• Nicholas M. Odhiambo University of South Africa, South Africa

Most recent studies have established a significant link between public debt and inflation. However, limited studies dealt with the direction of causality between these variables. Since external public debt relief in 2005, the Nigerian government has pursued public debt management strategy aimed at restoring macroeconomic stability. Yet, inflation rates remain high compared to the Central Bank’s single digit policy target range of 6\% to 9\%. It is unclear whether the high inflation rate is related to the renewed contributions of external and domestic public debt in the funding of the budget deficit, and if it is, what could be the direction of the causality? Therefore, this study examines the dynamic Granger-causality between public external and domestic debt and inflation in Nigeria using annual data for the period between 1986 and 2019. The study introduces interest rate and economic growth as intermittent variables alongside key variables to create a multivariate Granger-causality model to account for omission-of-variable bias. Using the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and the error correction model (ECM)-based Granger-causality test, the results show a distinct unidirectional causal flow from inflation to external debt. The findings further show a feedback relationship between domestic debt and inflation in the short run, but causality runs from domestic debt to inflation in the long run. The findings of this study have important policy implications.

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Nigeria Inflation Rate

Nigeria's annual inflation rate soared to a fresh 1996-high of 31.7% in february 2024, up from 29.9% in january and above market forecasts of 31%, mainly due to the effects of oil subsidy removal and devaluation of the naira. between june 2023, when the foreign exchange market was liberalized, and mid-february 2024, the naira depreciated by 69%, leading to a considerable rise in import costs and significantly impacting nigeria's import-dependent economy. other drivers of inflation include instability in food-producing areas of the country, deteriorating rural infrastructure and climate change. food inflation, which accounts for the bulk of nigeria's inflation basket, continued to climb and hit 37.9% in february, the highest since august 2005, from 35.4% in the prior month. the annual core inflation rate, which excludes farm produce, jumped to a multi-year high of 24.7% in february. on a monthly basis, consumer prices surged by 3.12% in february, after a 2.64% rise in the prior month. source: national bureau of statistics, nigeria, inflation rate in nigeria increased to 31.70 percent in february from 29.90 percent in january of 2024. inflation rate in nigeria averaged 13.38 percent from 1996 until 2024, reaching an all time high of 47.56 percent in january of 1996 and a record low of -2.49 percent in january of 2000. this page provides - nigeria inflation rate - actual values, historical data, forecast, chart, statistics, economic calendar and news. nigeria inflation rate - data, historical chart, forecasts and calendar of releases - was last updated on april of 2024., inflation rate in nigeria increased to 31.70 percent in february from 29.90 percent in january of 2024. inflation rate in nigeria is expected to be 34.00 percent by the end of this quarter, according to trading economics global macro models and analysts expectations. in the long-term, the nigeria inflation rate is projected to trend around 20.00 percent in 2025 and 17.00 percent in 2026, according to our econometric models.,   markets,   gdp,   labour,   prices,   money,   trade,   government,   business,   consumer,   taxes,   energy,   health,   climate.

Nigeria Inflation

Latest news, inflation forecasts and outlook for nigeria, inflation in nigeria, nigeria inflation chart.

Note: This chart displays Inflation Rate (CPI, annual variation in %) for Nigeria from 2014 to 2023. Source: National Bureau of Statistics Nigeria.

Nigeria Inflation Data

Inflation comes in at highest level since may 1996 in january.

Inflation came in at 29.9% in January, up from December’s 28.9%. January's figure represented the highest inflation rate since May 1996. The result was largely driven by a faster increase in food prices. In addition, price pressures for housing and energy rose at a stronger pace. The trend pointed up, with annual average inflation coming in at 25.3% in January (December: 24.7%). Meanwhile, core inflation rose to 23.4% in January, from the previous month's 23.1%. Finally, consumer prices increased 2.64% in January over the previous month, picking up from December's 2.29% rise. January's figure was the highest reading since August 2023.

Our panelists have upgraded their inflation forecasts for 2024 after the Central Bank devaluated the currency on 30 January. Inflation is now forecast to average above last year’s levels. Further upwards revisions are still on the cards.

Analysts at the EIU commented on the outlook: “Given the pace of month-on-month increases in prices, deeply negative real interest rates and the large currency devaluation implemented in early February, annual average inflation will climb further in 2024, to average of 28.5%, from an annual rate of 24.7% in 2023.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Nigerian inflation projections for the next ten years from a panel of 22 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable inflation forecast available for Nigerian inflation.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Nigerian inflation projections.

Latest Global Inflation News

Uruguay: inflation drops to lowest level since august 2005 in march, euro area: inflation falls in march, peru: inflation drops in february, kazakhstan: inflation moderates in march, kenya: inflation falls to two-year low in march, indonesia: inflation increases in march, vietnam: inflation holds stable in march, free sample report.

Interested in economic reports, analysis and data? FocusEconomics provides data, forecasts and analysis for hundreds of countries and commodities. Request your free sample report now.

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Home — Essay Samples — Economics — Monetary Policy — Monetary Policy and Inflation in Nigeria

Monetary Policy and Inflation in Nigeria

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Inflation theory, monetarism, money and inflation, empirical review on monetary policy and inflation.

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Central bank of Nigeria raises interest rates to combat soaring inflation

By Agencies

Nigeria's central bank implemented a significant increase in its monetary policy rate, raising it by 200 basis points to 24.75% from the previous 22.75%, according to Governor Olayemi Cardoso on Tuesday.

This decision marks a continuation of the bank's efforts to combat surging inflation.

Last month, the bank executed its most substantial rate hike in approximately 17 years, elevating the rate by 4 percentage points in a bid to rein in inflationary pressures. With inflation surpassing 30% on an annual basis, reaching its highest level in nearly three decades, the country grapples with a cost of living crisis affecting millions of its citizens.

Speaking at a press conference, Governor Cardoso emphasized the Monetary Policy Committee (MPC)'s unanimous conviction to persist with the tightening measures to curb inflation while anticipating a moderation in price pressures starting from May. He underscored the committee's focus on stabilizing inflation expectations and ensuring sustained exchange rate stability.

This recent decision by the MPC, only the second under Governor Cardoso's tenure since assuming office in September, follows a series of reforms initiated by President Bola Tinubu, including the cessation of a burdensome fuel subsidy and the devaluation of the national currency, the naira, on two occasions.

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KPMG: Nigeria’s inflation battle hinges on fixing supply-side issues

KPMG has said that the effectiveness of the Central Bank of Nigeria’s (CBN) monetary tightening strategies may fall short unless Nigeria addresses the underlying supply-side constraints fuelling cost-push inflation.  

In issue 15 of the Flashnotes publication of KPMG in Nigeria, which was seen by Nairametrics, the firm emphasised the need for a balanced approach that tackles both demand-pull and cost-push inflationary pressures.

It called for collaborative efforts between fiscal and monetary authorities to dismantle the supply-side barriers contributing to inflation.  

The document read:  

• “We recognise that price stability is a necessary condition for economic growth. We equally recognise that raising interest rates is a natural response to inflationary pressures in monetary policy playbooks.  
• “However, we emphasise that monetary tightening is more apt for addressing demand-pull inflation. Thus, inflation may yield little in response to the monetary tightening efforts, unless the supply-side bottlenecks fanning cost-push inflation are also addressed.  
• “Eliminating these bottlenecks will require concerted efforts from both fiscal and monetary authorities. We are confident that such efforts will better deliver the intended price stability without trading-off economic growth.”  

Inflation may lose steam after mid-2024  

According to KPMG, a potential slowdown in inflation rates is on the horizon post-mid-2024, largely attributed to statistical base effects.  

However, this expected deceleration depends on the absence of new economic policies that might exert upward pressures on prices.  

The firm advised against attributing any reduction in inflation rates solely to monetary policy tightening, highlighting the influence of broader economic factors and policies.  

KPMG said:  

• “Meanwhile, with the onset of base effect expected after mid-year, the next few months will be important for assessing the impact of the CBN’s monetary tightening on inflation.  
• “Statistically, inflation is set to lose steam after mid-year largely because of the onset of base effect, except economic policies that significantly pressure prices are implemented. Attributing a decrease in inflation solely to the tightening of liquidity once the base effect kicks in after midyear might be inaccurate.”  

Higher MPR to drive portfolio investments  

The CBN’s decision to elevate the Monetary Policy Rate (MPR) to a historic high of 24.75% in March 2024 is expected to attract more foreign exchange inflows, driven by the appeal of higher interest rates. KPMG projected that these inflows will primarily come from portfolio investments, seeking to benefit from the increased rates.  

However, the firm also cautioned about the potential volatility associated with these “hot money” inflows, noting the risks of sudden reversals that they pose to macroeconomic stability.  

• “We expect the higher MPR to attract greater FX inflows that would drive the appreciation of the Naira in the foreign exchange market. However, most of these gains are expected to come from portfolio investments as investors move to take advantage of the higher interest rate environment.  
• “The downside of this “hot money” inflow, however, is the risk of sharp reversals in response to changes in market signals. Large scale capital reversals are historically known to birth macroeconomic instability.”  

Already, Nigeria has recorded about $3.8 billion foreign capital inflow in the first quarter of 2024 with investors ( especially foreign investors ) interested in government securities for high yields.   

Tightening policy threatens Tinubu’s $1 trillion economy goal  

KPMG further noted that the quest for price stability may inadvertently sacrifice economic growth. With Nigeria’s growth trajectory already on a decelerating path, the current policy stance could further deter investments in the real sector, negatively affecting employment and growth.  

The firm warned that high borrowing costs and a restrictive monetary environment might lead to an increase in non-performing loans and challenge the government’s ambitious goal of expanding Nigeria’s economy to a $1 trillion economy within the next eight years.  

The firm said:  

• “Furthermore, we note that targeting inflation from the demand-side (via a sustained monetary tightening of such scale) may inadvertently cause Nigeria to trade-off some growth for lower inflation. This is especially worrying as the nation’s growth has been slow, fragile, and decelerating (3.4% in 2021, 3.1% in 2022 and 2.74% in 2023) in recent times.  
• “With the real sector already burdened by high borrowing costs and inflation, the CBN’s decision could further shrink the sector by disincentivising investments. The higher borrowing costs may induce a scale back on investments in the real sector, adversely affecting employment and growth levels.  
• “Also, monetary tightening of such scale may give rise to higher non-performing loans. The higher interest rate environment may strain borrowers’ finances and raise their risk of defaulting on loans.  
• “Moreover, the government has expressed a desire to grow Nigeria’s economy to a $1 trillion economy over the next 8 years. This ambitious growth drive requires the economy to attain about 12% CAGR over the targeted period.  
• “However, the elevated Cash Reserve Ratio (CRR) could further restrict the ability of banks to channel credit to support the economy’s ambitious growth drive. Thus, the restrictive monetary policy environment further casts shadows on the attainability of the government’s economic objective.”  

Analysts at Augusto & Co earlier said that President Bola Tinubu’s plan to reduce interest rates in the country may clash with the existing tightening monetary policy of the CBN . They noted that the president’s preference for lower interest rates to support economic growth raises the risk of inaction and will be a true test of the CBN’s independence.

However, so far, the CBN has shown its independence with a hawkish monetary stance.  

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Sami Tunji is a writer, financial analyst, researcher, and literary enthusiast. Aside from having expertise in various forms of writing (creative, research, and business writing), he is passionate about socio-economic research, financial literacy, and human development. Currently, he is a financial analyst at Nairametrics and an African Liberty Writing Fellow 2023/2024.

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Poor Nations Are Writing a New Handbook for Getting Rich

Economies focused on exports have lifted millions out of poverty, but epochal changes in trade, supply chains and technology are making it a lot harder.

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By Patricia Cohen

Reporting from London

For more than half a century, the handbook for how developing countries can grow rich hasn’t changed much: Move subsistence farmers into manufacturing jobs, and then sell what they produce to the rest of the world.

The recipe — customized in varying ways by Hong Kong, Singapore, South Korea, Taiwan and China — has produced the most potent engine the world has ever known for generating economic growth. It has helped lift hundreds of millions of people out of poverty, create jobs and raise standards of living.

The Asian Tigers and China succeeded by combining vast pools of cheap labor with access to international know-how and financing, and buyers that reached from Kalamazoo to Kuala Lumpur. Governments provided the scaffolding: They built up roads and schools, offered business-friendly rules and incentives, developed capable administrative institutions and nurtured incipient industries.

But technology is advancing, supply chains are shifting, and political tensions are reshaping trade patterns. And with that, doubts are growing about whether industrialization can still deliver the miracle growth it once did. For developing countries, which contain 85 percent of the globe’s population — 6.8 billion people — the implications are profound.

Today, manufacturing accounts for a smaller share of the world’s output, and China already does more than a third of it . At the same time, more emerging countries are selling inexpensive goods abroad, increasing competition. There are not as many gains to be squeezed out: Not everyone can be a net exporter or offer the world’s lowest wages and overhead.

There are doubts that industrialization can create the game-changing benefits it did in the past. Factories today tend to rely more on automated technology and less on cheapworkers who have little training.

“You cannot generate enough jobs for the vast majority of workers who are not very educated,” said Dani Rodrik, a leading development economist at Harvard.

The process can be seen in Bangladesh, which the World Bank’s managing director called “one of the world’s greatest development stories” last year. The country built its success on turning farmers into textile workers.

Last year, though, Rubana Huq, chair of Mohammadi Group, a family-owned conglomerate, replaced 3,000 employees with automated jacquard machines to do complex weaving patterns.

The women found similar jobs elsewhere in the company. “But what follows when this happens on a large scale?” asked Ms. Huq, who is also president of the Bangladesh Garment Manufacturers and Exporters Association.

These workers don’t have training, she said. “They’re not going to turn into coders overnight.”

Recent global developments have accelerated the transition.

Supply chain meltdowns related to the Covid-19 pandemic and to sanctions prompted by Russia’s invasion of Ukraine drove up the price of essentials like food and fuel, biting into incomes. High interest rates, imposed by central banks to quell inflation, set off another series of crises: Developing nations’ debts ballooned , and investment capital dried up.

Last week, the International Monetary Fund warned of the noxious combination of lower growth and higher debt.

The supercharged globalization that had encouraged companies to buy and sell in every spot around the planet has also been shifting. Rising political tensions, especially between China and the United States, are affecting where businesses and governments invest and trade.

Companies want supply chains to be secure as well as cheap, and they are looking at neighbors or political allies to provide them.

In this new era, Mr. Rodrik said, “the industrialization model — which practically every country that has become rich has relied on — is no longer capable of generating rapid and sustained economic growth.”

Nor is it clear what might replace it.

There’s a future in service jobs.

One alternative might be found in Bengaluru, a high-tech center in the Indian state of Karnataka.

Multinationals like Goldman Sachs, Victoria’s Secret and the Economist magazine have flocked to the city and set up hundreds of operational hubs — known as global capability centers — to handle accounting, design products, develop cybersecurity systems and artificial intelligence, and more.

Such centers are expected to generate 500,000 jobs nationwide in the next two to three years, according to the consulting firm Deloitte .

They are joining hundreds of biotech, engineering and information technology companies including homegrown giants like Tata Consultancy Services, Wipro and Infosys Limited. Four months ago, the American chip company AMD unveiled its largest global design center there.

“We have to move away from the idea of classic development stages, that you go from the farm to the factory and then from the factory to offices,” said Richard Baldwin , an economist at the IMD in Lausanne. “That whole development model is wrong.”

Two-thirds of the world’s output now comes from the service sector — a mishmash that includes dog walkers, manicurists, food preparers, cleaners and drivers, as well as highly trained chip designers, graphic artists, nurses, engineers and accountants.

It is possible to leapfrog to the service sector and grow by selling to businesses around the world, Mr. Baldwin argued. That is what helped India become the world’s fifth-largest economy .

In Bengaluru, formerly known as Bangalore, a general rise in middle-class living attracted more people and more businesses that, in turn, attracted more people and businesses, continuing the cycle, Mr. Baldwin explained.

Covid sped this transition, by forcing people to work remotely — from a different part of town, a different city or a different country.

In the new model, countries can focus growth around cities rather than a particular industry. “That creates economic activities which are fairly diverse,” Mr. Baldwin said.

“Think Bangalore, not South China,” he said.

Free markets are not enough.

Many developing nations remain focused on building export-oriented industries as the path to prosperity. And that’s how it should be, said Justin Yifu Lin , dean of the Institute of New Structural Economics at Peking University.

Pessimism about the classic development formula, he said, has been fueled by a misguided belief that the growth process was automatic: Just clear the way for the free market and the rest will take care of itself.

Countries were often pressured by the United States and the international institutions to embrace open markets and hands-off governance.

Export-led growth in Africa and Latin America stumbled because governments failed to protect and subsidize infant industries, said Mr. Lin, a former chief economist at the World Bank.

“Industrial policy was taboo for a long time,” he said, and many of those who tried failed. But there were also success stories like China and South Korea.

“You need the state to help the private sector overcome market failures,” he said. “You cannot do it without industrial policy.”

It won’t work without education.

The overriding question is whether anything — services or manufacturing — can generate the type of growth that is desperately needed: broad based, large scale and sustainable.

Service jobs for businesses are multiplying, but many offering middle and high incomes are in areas like finance and tech, which tend to require advanced skills and education levels far above what most people in developing nations have.

In India, nearly half of college graduates don’t have the skills they need for these jobs, according to Wheebox , an educational testing service.

The mismatch is everywhere. The Future of Jobs report , published last year by the World Economic Forum, found that six in 10 workers will need retraining in the next three years, but the overwhelming majority won’t have access to it.

Other kinds of service jobs are proliferating, too, but many are neither well paid nor exportable. A barber in Bengaluru can’t cut your hair if you’re in Brooklyn.

That could mean smaller — and more uneven — growth.

Researchers at Yale University found that in India and several countries in sub-Saharan Africa, agricultural workers jumped into consumer service jobs and raised their productivity and incomes.

But there was a catch: The gains were “strikingly unequal” and disproportionately benefited the rich .

With a weakening global economy , developing countries will need to wring every bit of growth they can from every corner of their economies. Industrial policy is essential, Mr. Rodrik of Harvard said, but it should focus on smaller service firms and households because that is going to be the source of most future growth.

He and others caution that even so, gains are likely to be modest and hard won.

“The envelope has shrunk,” he said. “How much growth we can get is definitely less than in the past.”

An earlier version of this article misidentified the location of IMD. It is in Lausanne, not Geneva.

How we handle corrections

Patricia Cohen writes about global economics and is based in London. More about Patricia Cohen

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What’s keeping egg prices high for Easter? It’s not just inflation

Egg prices are at near-historic highs in many parts of the world as Easter approaches, reflecting a market scrambled by disease, high demand and growing costs for farmers (AP video: Mike Householder)

FILE - Eggs are cleaned and disinfected at the Sunrise Farms processing plant in Petaluma, Calif., on Thursday, Jan. 11, 2024, which had seen an outbreak of avian flu. Egg prices are at near-historic highs in many parts of the world as the spring holidays approach, reflecting a market scrambled by disease, high demand and growing costs for farmers. (AP Photo/Terry Chea)

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FILE - A youngster collects Easter eggs during an egg hunt at Easterfest at the Bowling Green Ballpark in Bowling Green, Ky., April 8, 2023. In 2024, for the second year in a row consumers have faced sticker shock ahead of Easter and Passover, events in which eggs play prominent roles. (Grace Ramey/Daily News via AP, File)

File - A hen stands next to an egg, Jan. 10, 2023, at a farm in Glenview, Ill. Egg prices are at near-historic highs in many parts of the world as the spring holidays approach, reflecting a market scrambled by disease, high demand and growing costs for farmers.(AP Photo/Erin Hooley, File)

Egg prices are at near-historic highs in many parts of the world as the spring holidays approach, reflecting a market scrambled by disease , high demand and growing costs for farmers .

It’s the second year in a row consumers have faced sticker shock ahead of Easter and Passover , both occasions in which eggs play prominent roles.

While global prices are lower than they were at this time last year, they remain elevated, said Nan-Dirk Mulder, a senior global specialist with Dutch financial firm RaboBank’s RaboResearch Food and Agribusiness division. Mulder doesn’t expect them to return to 2021 levels.

In the United States , the average price of a dozen eggs was $2.99 in February, down from $4.21 last year, according to government data. Still, that’s significantly more than the $1.59 cents per dozen consumers were paying in February 2021.

In Europe , egg prices are 10% to 15% lower than last year but still about double what they were in 2021, Mulder said.

One major culprit is avian flu . Outbreaks of the deadly respiratory disease were reported in Europe, Africa and Asia in 2020 and spread to North America in 2021. In 2022 alone, more than 131 million poultry worldwide died or were culled on affected farms, according to the World Health Organization.

Outbreaks are continuing. In December, the U.S. confirmed cases in 45 commercial flocks and 33 backyard flocks, affecting 11.4 million birds, according to the U.S. Department of Agriculture.

In South Africa , egg prices soared after 40% of laying hens were killed late last year due to the respiratory disease, Mulder said. A tray of six eggs cost 25.48 South African rand ($1.34) last month, up 21% from February 2023.

Even when avian flu dissipates, it can take a long time for the egg market to settle. It takes a farm three to six months to replenish a flock, so during that time, egg supplies are lower and prices rise, said Emily Metz, president of the American Egg Board, a marketing organization.

If farms restock with too many chickens, it can drive prices down. That’s what happened in the U.S. last summer when egg prices plunged to $2 per dozen.

“It’s supply and demand searching out. You have to have a profitable price,” David Anderson, a professor and extension economist for livestock and food marketing at Texas A&M University, said.

And profits can be hard for farmers to come by during periods of inflation . Chicken feed represents up to 70% of a farmer’s costs, and feed prices doubled between 2020 and 2022, Mulder said. Weather, COVID-related disruptions and the war in Ukraine – which drove up the price of wheat and other crops -- were all contributors.

In Nigeria, the cost of a crate of eggs has doubled since the beginning of the year due to weakened currency, the removal of fuel subsidies and high costs for farmers.

Teslimat Abimbola, who runs a poultry farm in the southern city of Ibadan, said 25 kilograms of feed that cost 2,500 Nigerian naira ($1.78) in 2020 now costs 13,000 naira ($9.23). Abimbola has lost some customers as a result of price increases.

“Many farms have been forced to shut down due to the high costs of rearing chickens,” Abimbola said.

The government of Lagos State, Nigeria’s biggest economic center, has implemented a subsidy program to help consumers deal with the increased costs of eggs.

Elsewhere, government regulations play a part in lifting egg prices. Multiple states, including California and Massachusetts, have passed cage bans for egg-laying hens since 2018; this year, bans are set to take effect in Washington, Oregon and Michigan.

Converting to cage-free facilities is a big investment for farmers, and consumers may not always realize that’s a factor in the higher prices they see at the grocery store, Metz said. She anticipates such conversion costs will eventually fall as more farms make the changeover.

Price peaks are inevitably followed by price drops, and egg prices will eventually settle into more normal patterns. In the short term, the holiday demand that picks up every Easter will ease heading into summer, Anderson said. Meanwhile, improving biosecurity measures should help blunt the impact of avian flu , he said.

Lyncoya Ilion, who teaches cooking classes and runs a catering business called Catered by Coya in Brown Deer, Wisconsin, says she’s noticed egg prices inching back up over the last two to three months but hopes she won’t have to pass her costs onto clients.

“I haven’t had to increase prices yet because I’m anticipating that the egg prices will decrease again soon,” Ilion said.

That’s a good bet. In the U.S., egg prices are expected to decrease around 2.8% this year, according to the U.S. Department of Agriculture. That won’t put them back to pre-COVID levels, but it should give some relief.

“People really love eggs, and they notice when that price fluctuates,” Metz said. “Our farmers wish it wasn’t such a sharp up and down as well. It makes everything challenging.”

AP Business Reporter Taiwo Adebayo contributed from Lagos, Nigeria.