Any Hope for Consumers as Inflation Keeps Rising?

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Business/ECONOMY 

Inflation increased from 11.37 per cent in January to close the fiscal year 2019 at 11.98 per cent. It represents an increase of 0.61 basis points and a clear evidence of increased hardship for consumers, as they had increases in prices of commodities to contend with. Yet there are no indications that the rising trend will abate soon, given the government’s decision to continue to shut its land borders against some goods, which has resulted in price hikes at local markets. Bamidele Famoofo reports

There seems to be no end to the rising prices of commodities, especially food items in Nigeria as inflation maintains its galloping streak.

According to the National Bureau of Statistics (NBS), consumer price index (CPI), that measures inflation, increased by 0.61 points from 11.37 per cent in January, 2019 to 11.98 per cent in December, 2019.

The plan of the Central Bank of Nigeria (CBN) some three years ago was to bring inflation to single-digit rate.

CBN Governor, Mr. Godwin Emefiele, had announced on his assumption of office that it planned to contain inflationary pressures in the economy and bring inflation down to a single digit, targeting a range of 6 to 9 per cent.

However, since inflation doubled from 9.5 per cent in 2015 to 18.5 per cent in 2016, CBN has attempted to use a contractionary policy strategy to reduce it to single digit, which has not yet occurred. The monetary contraction strategy has brought some benefits though. Since CBN raised interest rate in July, 2016, inflation has dropped from 17.1 per cent in July 2016 to 11.25 per cent in March, 2019.

The declining trend has since been reversed, as inflation resumed an upward movement until the close of the fiscal year 2019.

The percentage change in the average composite CPI for the 12 months period ending December 2019 over the average of the CPI for the previous twelve months period was 11.40 per cent, showing 0.05 per cent point from 11.35 per cent recorded in November 2019. The urban inflation rate increased by 12.62 per cent (year-on-year) in December 2019 from 12.47 per cent recorded in November 2019, while the rural inflation rate increased by 11.41 per cent in December 2019 from 11.30 per cent in November 2019.

On the last count, CPI, which measures inflation, increased by 11.98 per cent (year-on-year) in December 2019. It was 0.13 per cent points higher than the rate recorded in November 2019 (11.85) per cent.

NBS said, “Increases were recorded in all COICOP divisions that yielded the headline index. On month-on-month basis, the headline index increased by 0.85 per cent in December 2019, which was 0.17 per cent rate lower than the rate recorded in November 2019 (1.02) per cent. On a month-on-month basis, the urban index rose by 0.90 per cent in December 2019, down by 0.17 from 1.07 per cent recorded in November 2019, while the rural index also rose by 0.82 per cent in December 2019, down by 0.16 from the rate recorded in November 2019 (0.98) per cent. The corresponding twelve-month year-on-year average percentage change for the urban index is 11.83 per cent in December 2019. This is higher than 11.75 per cent reported in November 2019, while the corresponding rural inflation rate in December 2019 was 11.00 per cent compared to 10.98 per cent recorded in November 2019.

“Food remains a major driver of inflation in Nigeria as composite food index rose by 14.67 per cent in December 2019 compared to 14.48 per cent in November 2019. The statistics bureau noted that the rise in the food index was caused by increases in prices of edible commodities like bread and cereals, meat, fish, oils and fats, potatoes, yam and other tubers.

“On month-on-month basis, the food sub-index increased by 0.97 per cent in December 2019, down by 0.28 per cent points from 1.25 per cent recorded in November 2019. The average annual rate of change of the food sub-index for the twelve-month period ending December 2019 over the previous twelve-month average was 13.74 per cent, 0.09 per cent points from the average annual rate of change recorded in November 2019 (13.65) per cent.”

Core inflation, which excludes the prices of volatile agricultural produce stood at 9.33 per cent in December 2019, up by 0.34 per cent when compared with 8.99 per cent recorded in November 2019. On month-on-month basis, the core sub-index increased by 0.81 per cent in December 2019. This was up by 0.02 per cent when compared with 0.79 per cent recorded in November 2019. The highest increases were recorded in prices of hospital services, hairdressing saloons and personal grooming establishment, garments, repair and hire of footwear, vehicle spare parts, passenger transport by air, shoes and other footwear, appliances, articles and products for personal care, clothing materials, other articles of clothing and clothing accessories and cleaning, repair and hire of clothing.

The average 12-month annual rate of change of the index was 9.15 per cent for the twelve-month period ending December 2019; this is 0.04 per cent points lower than 9.19 per cent recorded in November 2019.

Quarterly Review

Inflation dropped to 11.25 per cent (year-on-year) at the end of first quarter ended March 31, 2019. The figure was 0.06 per cent points lower than the rate recorded in February 2019 (11.31) per cent. On month-on-month basis, the headline index increased by 0.79 per cent in March 2019, this is 0.06 per cent rate higher than the rate recorded in February 2019 (0.73) per cent. The percentage change in the average composite CPI for the 12 months period ending March 2019 over the average of the CPI for the previous twelve months period was 11.40 per cent, showing 0.16 per cent point from 11.56 per cent recorded in February 2019.

Inflation further dropped at the end of second quarter to 11.23 per cent (year-on-year) in June 2018. This is 0.37 per cent points less than the rate recorded in May 2018 (11.61) per cent and represents the 17th consecutive disinflation since January 2017.

Increases were recorded in all COICOP divisions that yield the headline index.

On a month-on-month basis, the headline index increased by 1.24 per cent in June 2018, up by 0.15 per cent points from the rate recorded in May 2018.

The percentage change in the average composite CPI for the 12 months period ending June 2018 over the average of the CPI for the previous twelve months period was 14.37 per cent, showing 0.42 per cent point lower from 14.79 per cent recorded in May 2018.

Third quarter performance of CPI showed a marginal increase at 11.28 per cent (year-on-year) in September 2018. This is 0.05 per cent points higher than the rate recorded in August 2018 (11.23) per cent.

Headline index on month-on-month increased by 0.84 per cent in September 2018, down by 0.21 per cent points from the rate recorded in August 2018 (1.05) per cent.

The percentage change in the average composite CPI for the 12-month period ending September 2018 over the average of the CPI for the previous 12 months period was 13.16 per cent, showing 0.39 per cent point from 13.55 per cent recorded in August 2018.

Expert’s View

A Lagos-based economist, Marcel Okeke, reacting to the current inflationary trend in the country and the declaration by President Muhammadu Buhari that the borders will not be opened anytime soon, said the stance of the president would further drive up prices in the markets.

“This will worsen the situation, because the goods, especially foodstuff that used to be available in quantum (even if brought in via smuggling) are now scarce. Local production or supply is not meeting demand; so price goes up. It is also not being easy for people to change taste overnight, from foreign rice to local, for instance. Local producers are also deliberately hiking their prices to cash in on the lingering (unilateral) land border closure as long as it lasts,” Okeke explained.