Exploring the drivers of inflation in Nigeria: the roles of insecurity, oil, food and crop production

Purpose Nigeria’s inflation surged after the COVID-19 pandemic, reaching 34.19% in 2023 – its highest in 28 years – with food inflation at 40.53%. In response, the Central Bank of Nigeria (CBN) implemented aggressive monetary tightening, raising interest rates from 18.75 to 26.25% and setting the cash reserve ratio (CRR) at a global high of 45%. Despite these measures, inflation worsened, the Naira depreciated to ₦1,600/$ and economic hardship deepened, reducing purchasing power and increasing poverty. Public protests have followed, demanding better governance. However, limited research has explored the influence of nonmonetary factors on inflation in the post-COVID-19 era, as most studies focus primarily on monetary policy. This study aims to examine the roles of insecurity, oil prices, food production and crop output in driving inflation in Nigeria, using the cost–push theory as a framework and assessing the effectiveness of monetary policy. Design/methodology/approach The study uses time series data from 1986 to 2023 and applies the autoregressive distributed lag (ARDL) model, along with two robustness checks: canonical cointegration regression (CCR) and fully modified least squares (FMOLS). This approach captures both the short- and long-term effects of insecurity, oil prices, food and crop production and the monetary policy rate on inflation. Findings The results show that insecurity and crop production increase inflation in both the short and long term. Oil prices have a positive short-term effect but a negative long-term effect. Food production and the monetary policy rate help reduce inflation across both periods, suggesting that monetary tightening is effective. The CCR and FMOLS results confirm these long-run relationships. Overall, effective inflation control in Nigeria requires addressing both nonmonetary and monetary factors. Practical implications To manage inflation, Nigeria must address insecurity, support stable crop production, reduce reliance on oil and maintain a responsive monetary policy. Strengthening security would protect farmers and supply chains, supporting consistent food production and price stability. Enhancing agricultural productivity through subsidies, infrastructure and modern farming techniques can also reduce inflationary pressures. While oil price volatility affects inflation in the short term, long-term strategies should promote energy diversification. The findings support the continued use of interest rate adjustments to manage inflation, provided they remain responsive to economic trends. Originality/value This study fills a research gap by focusing on nonmonetary drivers of inflation in Nigeria, specifically insecurity, oil prices and agricultural output, which are relatively underexplored factors. It also offers empirical insights into the effectiveness of monetary policy in the Nigerian context. These findings are relevant for achieving Sustainable Development Goals (SDGs) 2 (Zero Hunger) and 8 (Decent Work and Economic Growth) and can inform policy in other developing countries facing similar inflationary challenges.