James Emejo in Abuja
As inflation increased to 11.85 per cent in November compared to 11.61 per cent in the preceding month, analysts have urged the federal government to double its support for local farmers to boost food production as an effective way to respond to the rising prices of commodities.
They tasked the government to concentrate efforts at developing critical infrastructure to boost output, noting that the present inflationary pressures are mainly demand-push in reaction to the closure of the country’s land borders to tame smuggling and dumping activities by its neighbouring countries.
They also said there was little the monetary authorities could do presently to respond to the rising prices while urging the government to apply some fiscal measures, including temporarily reopening the borders, especially at the yuletide period.
The analysts spoke in separate interviews with THISDAY yesterday against the backdrop of the release on the same day of the Consumer Price Index (CPI), which measures inflation.
The CPI released by the National Bureau of Statistics (NBS) showed that inflation further increased to 11.85 per cent (year-on-year) in November compared to 11.61 per cent in October.
The NBS stated that increases were recorded in all the divisions that determine the headline index.
Food inflation rose to 14.48 per cent compared to 14.09 per cent in the preceding month.
The CPI report attributed the rise in the food index to increases in the prices of bread, cereals, oils and fats, meat, potatoes, yams and other tubers, and fish.
On month-on-month basis, the food sub-index increased by 1.25 per cent in the period under review, down by 0.08 per cent points from 1.33 per cent recorded in October.
The average annual rate of change of the food sub-index for the 12-month period ending November over the previous 12-month average was 13.65 per cent, 0.11 percentage points from the 13.54 per cent in October.
The report showed that core inflation also increased by 0.11 per cent to 8.99 per cent in November compared to 8.88 per cent in October.
The highest increases were recorded in prices of cleaning, repair and hire of clothing, hospital services, hairdressing salons and personal grooming establishment, glassware, tableware and household utensils.
Others are vehicle spare parts, repair and hire of footwear, shoes and other footwear, clothing materials, other articles of clothing and clothing accessories, medical services and passenger transport by air.
The urban inflation rate increased to 12.47 per cent (year-on-year) in November compared to 12.20 per cent in October, while the rural index also increased to 11.30 per cent in the review period from 11.07 per cent.
According to the NBS, month-on-month, the urban index rose by 1.07 per cent down by 0.08 per cent from 1.15 per cent recorded in October, while the rural index also rose by 0.98 per cent in November, down by 0.01 from 0.99 per cent in the preceding month.
The headline index has continued to defy monetary policy measures to limit it to single digit.
The uptick is a setback for both monetary and fiscal authorities, which had only managed to curtail its rise for a few consecutive months before a rebound that had seen inflation rising again lately.
The Central Bank of Nigeria (CBN), which has the mandate to stabilise prices, had set an inflation target of about six per cent to nine per cent in its current five-year plan.
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, 11.02 per cent in August before returning to 11.24 per cent in September, 11.61 per cent in October and now 11.85 per cent in November.
The rise further dampens the prospects for lower interest rate regime as well as reduction in the cost of borrowing.
The MPR, which is the rate at which the apex bank lends to commercial banks is currently at 13.5 per cent.
However, reacting to the inflation outcome for the month, economist and former Director General, Abuja Chamber of Commerce and Industry, Dr. Chijioke Ekechukwu, said the government should continue to support the farmers in their various programmes to force down prices.
He said the federal government should also prioritise competition and infrastructural facilities, including roads, rail and power, adding that insecurity must be frontally tackled head-on as a way of surmounting some of the current macroeconomic challenges.
He added, however, that the forces of demand and supply would ultimately force the prices down in the long run.
According to him, “It is obvious that inflation is responding to price rise due to closure of the land borders, the Christmas season, effect of finance bill anticipation and insecurity in the land.”
Also, in an interview with THISDAY, an economist, Dr. Muhammad Rislanudeen, noted that nothing had really changed from the previous months as inflation had been worsened by the same conditions which led to an uptick in the preceding month.
He said the government should continue to ramp up support for local agricultural production in order to subdue food inflation in particular, adding that the current pressures are demand-push as a result of the closure of land borders.
Rislanudeen said the banking sector liquidity might also help to cut interest rate with positive impact on GDP.
He said: “I think this is predictable as the recent month-on-month spike in inflation is largely driven by food inflation due in large part to border closure leading to excess demand even as the food importation via our neighbouring countries fell outside the ECOWAS treaty on “rules of origin.”
“I suspect inflation will be further elevated due to the demand of the festive season (Christmas and new year). If the government ramp up its support for local agricultural production across the value chain, inflation and specifically food inflation will be subdued over time with positive impact of supporting local job creation, reducing unemployment as well as poverty.
“Banking sector liquidity might also drive interest rate downwards with positive impact on businesses and growth.”
West African Regional Representative of the African Association of Agricultural Economists (AAAE), Dr. Anthony Onoja, also told THISDAY that the monetary authorities might be helpless in responding to inflation pressure, adding that the yuletide and border closure have continued to sway the direction of prices.
He said the only available option to respond would have been to temporarily reopen the borders for this season to ease prices.
“The rise in inflation to 11.85 per cent in November is not surprising. The border closure has been stimulating inflation before November. Now that the yuletide is around the corner, the inflation is further exacerbated to meet with the seasonal demand for consumer goods.
“There is little the government or the CBN can do at this time. The only salvo would have been to ease the rate by opening the borders closed indefinitely even if it’s just to enable the consumers to afford consumer items they will require for the yuletide,” he stated.