James Emejo in Abuja
Economic analysts have attributed the rebound in inflation to 11.24 per cent in September to an array of factors, including the torrential rainfall witnessed since June.
They also suggested that the rainfall, which had caused serious flooding in major parts of the country known for food production, affected prices as they could not deliver perishable items to markets as a result of bad roads.
In separate interviews with THISDAY, the experts also fingered the proposed increase in Value Added Tax (VAT) by government as one of the reasons why inflation reversed its downward trajectory.
The Consumer Price Index (CPI), which measures inflation, rebounded to 11.24 per cent (year-on-year) in September compared to 11.02 per cent in the preceding month, according to figures released yesterday by the National Bureau of Statistics (NBS).
This is 0.22 per cent points higher than the rate recorded in August 2019, which was 11.02 per cent.
The statistics showed that food inflation rose to 13.51 per cent from 13.17 per cent in the month under review.
This rise in the food index was caused by increases in the prices of bread and cereals, oils and fats, meat, potatoes, yam and other tubers, fish and vegetables, the NBS said.
Also, core inflation, which excludes the prices of volatile agricultural produce, climbed to 8.94 per cent in September up by 0.26 per cent when compared with 8.68 per cent recorded in August.
According to the statistical agency, the highest increases were recorded in prices of cleaning, repair and hire of clothing, repair of household appliances, hospital services, major household appliances, glassware, tableware and household utensils, spirits, clothing materials, other articles of clothing accessories, garment and repair and hire of footwear.
The urban inflation rate increased by 11.78 per cent (year-on-year) in September from 11.48 per cent recorded in August, while the rural inflation rate increased by 10.77 per cent from 10.61 per cent in August.
On a month-on-month basis, the urban index rose by 1.13 per cent in September, up by 0.09 from 1.04 per cent recorded in August, while the rural index also rose by 0.96 per cent, up by 0.03 from the rate recorded in August (0.93) per cent.
The rebound in inflation is a setback for monetary and fiscal authorities, which had been able to curtail an upward trajectory in recent months.
The rise further dampens the prospects for interest rate cut as well as reduction in the cost of borrowing.
Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, had said recently that the apex bank was not in a hurry to lower the official lending rate known as the Monetary Policy Rate (MPR), which is the rate it lends to commercial banks.
Inflation had assumed a downward direction in recent consecutive months when it dropped in January 2019 to 11.37 per cent from 11.44 per cent in December in 2018.
The headline index further reduced to 11.31 per cent in February and 11.25 per cent in March but resorted to the upward trajectory in April when it climbed to 11.37 per cent- and further to 11.40 per cent in May- before falling to 11.22 per cent in June, 11.08 per cent in July and 11.02 per cent in August before the latest rebound to 11.24 per cent.
The rise in the headline index will pose a source of concern for the CBN, which has set an inflation target of between six to nine per cent but has been struggling to contain its rise in recent times.
Commenting on the rise in headline index, Professor of International Economic Relations, Covenant University, Prof. Jonathan Aremu, said the rebound, despite the harvest season, might have been caused by the fact that farmers were unable to access markets with perishable farm produce as a result of the flooding in various parts of the country.
He said the security challenges in the northern part of the country had not allowed farming to resume in full gear thereby affecting outcomes, adding that lack of access to markets as a result of rains and bad roads may have affected low return during harvest.
He, however, said the CBN has several monetary tools at its disposal to react appropriately to the uptick in inflation.
Aremu exonerated both the fiscal and monetary authorities for the rise in inflation, saying that in the current circumstance, there was nothing the CBN could have done to arrest the development as the weather conditions were beyond its control.
An economist and former Director General of Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, said the rise might not be unconnected with the proposed increase in VAT by government.
“The market may be responding to the increase in VAT to 7.5 per cent. Food price is gradually increasing, especially, local rice arising from closure of borders.
“The imminent Christmas season may be responsible, as traders are stockpiling and hoarding for the season.”
Also, the West African Regional Representative of the African Association of Agricultural Economists (AAAE), Dr. Tony Onoja, attributed the inflation rise to speculative demands resulting from border closure.
“The recent increasing trend of inflation recorded by the National Bureau for Statistics (NBS) may be partly linked to the border closure, which is prompting speculative demands for basic consumer items with the hope that the prices of these commodities will remain on the upward path.
“Such commodities include rice, clothes and other processed food items. The upward trend of inflation could also be exacerbated by the fact that we are drawing closer to December which is usually associated with inflation due to preparations for the yuletide season,” he added.