Moderation in Food, Commodity Prices Lower Inflation to 15.6%

James Emejo

The Consumer Price Index (CPI) which measures inflation moderated to 15.60 per cent (year-on -year) in January, 2022, compared to 16.47 per cent in the corresponding year, the National Bureau of Statistics (NBS) revealed yesterday.

The 0.87 per cent decline indicated that the headline inflation rate slowed down in January, when compared to the same month in the previous year.

However, month-on-month, the headline index slowed by 1.47 per cent in January, representing a 0.34 per cent points moderation compared to1.82 per cent recorded in December 2021.

According to the CPI figures for January which was released by the statistical agency, moderation in prices was recorded in all the parameters that determine inflation.

The composite food index slowed to 17.13 per cent in January, 2022, compared to 20.57 per cent in January 2021, while month-on-month, the food sub-index stood at 1.62 per cent in January 2022, down by 0.57 per cent points from 2.19 per cent recorded in December.

This rise in the food index was caused by increases in prices of bread and cereals, food product n.e.c, potatoes, yam and other tuber, soft drinks, oils and fats and fruit.

The NBS noted that the average annual rate of change of the food sub-index for the 12-month period ending January 2022, over the previous 12 -month average was 20.09 per cent, or 0.31 per cent points from the average annual rate of change of 20.40 per cent recorded in December.

On the other hand, core inflation, which excludes the prices of volatile agricultural produce increased to 13.87 per cent in January 2022, up by 2.02 per cent when compared to 11.85 per cent in January 2021.

On month-on-month, the core sub-index increased by 1.25 percent in January, down by 0.13 per cent when compared with 1.12 per cent recorded in December.

The highest increases were recorded in prices of electricity, liquid fuel, wine, tobacco, spirit, solid fuels, cleaning, repair and hire of clothing, shoes and other foot wear, other services in respect of personal transport equipment, other services n.e.c and pharmaceutical products.

The average 12-month annual rate of change of the index was 13.33 per cent for the 12-month period ending January 2022. This was 0.17 per cent points higher than 13.16 per cent recorded in December.

On the other hand, the urban inflation slowed to 16.17 per cent year-on-year in January 2022, from 17.03 per cent recorded in January 2021, while rural inflation rate also moderated to 15.06 per cent in January from 15.92 per cent in January 2021.

On a month-on-month basis, the urban index rose to 1.53 per cent in January 2022, down by 0.34 per cent points from 1.87 percent the rate recorded in December 2021.

On State – by – State comparison, all items inflation on year-on- year basis was highest in Abuja with 18.59 per cent followed by Kogi with 18.28 per cent and Bauchi, 17.61 per cent.

On the other hand, Kwara recorded the lowest with 12.94 per cent followed by Niger with 14.10 per cent and Oyo, 14.19per cent.

Food inflation on a year-on-year basis was highest in Kogi with 22.61 per cent followed by Enugu with 19.84 per cent and Akwa-Ibom 19.67 per cent, while Sokoto had 14.18 per cent, Bauchi 14.63 per cent and Kaduna 15.01 per cent as the lowest in January 2022.

The headline index had recorded the eight months of downwards trajectory before it was broken by the December when it climbed to 15.63 per cent, year-on-year as a result of the festive season.

Commenting on the latest inflation figure, Economist/Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, listed key drivers of inflation in the country to include exchange rate depreciation which he stressed has significant impact on headline inflation, especially the core sub index; liquidity challenges in the forex market affecting access to manufacturing and other inputs; security concerns disrupting agricultural activities, and climate change effects on agricultural production.

According to the former Director General of the Lagos Chamber of Commerce and Industry, some others include structural constraints affecting productivity in the agricultural value chain; high transportation costs affecting distribution costs across the country, saying “this is also reflected in the huge differential between farm gate prices and market prices.”

To curb the current inflationary pressure, Yusuf said government needed to address the security concerns causing disruption to agricultural activities; reform the foreign exchange market to stabilise the exchange rate, reduce volatility and stimulate forex inflows; address forex liquidity issues through appropriate policy measures and address the challenge of high transportation and logistics cost, among others.