Inflationary pressure in Nigeria’s economy has hit a double digit, upstaging major monetary policies of the Central Bank of Nigeria, CBN. National Bureau of Statistics, NBS, February report released yesterday indicated that Consumer Price Index, CPI, which measures inflation recorded a significant uptick with the headline index increasing by 11.4 per cent year-on-year, roughly 1.76 percentage points higher from 9.6 per cent recorded in January.
The new figure is at a two-year high last seen in December 2012 while the pace of acceleration has been one of the fastest in decades. The February inflation figure also show a massive overrun of CBN’s inflation tolerance limit of 9.0 per cent while upstaging the apex bank’s monetary policy strategy of price and exchange rate stability. In line with its statutory mandate of price and exchange rate stability as well as the bid to stem the inflationary pressure which had pressed on since first quarter 2015, CBN lowered the benchmark interest rate by 2.0 percentage points to 11 per cent in November last year while placing administrative controls over exchange rate volatility in its official window, thus ensuring no major change in the exchange rate at N199/USD1 even as parallel market rates rose as high as N400/USD1 before moderating to N320/USD1 last week market.
But in its report yesterday NBS indicated the obvious impact of foreign exchange rate crises on inflation indicating that rather than the CBN’s stable official exchange rate, the economy actually runs on parallel market rates reflecting in upwards movement in the general price levels. In the report NBS stated, “the All-Items-Less-Farm-Produce or Core sub-index, also increased at a faster pace in February as imported items as well as other domestic shocks resulted in ripple effects across many divisions that contribute to the Core.
The index increased by 11.0 per cent in February, roughly 2.2 percentage points from rates recorded in January. “Imported food items as well as other necessary inputs to producing key local stapels such as bread continue to drive the food index higher”, NBS stated.
Prices increased across all sectors, according to the NBS report, “the faster pace of increases which led to the overall increase in the headline index were recorded across almost all major divisions which contribute to the headline index with the exception of the Restaurants and Hotels division which increased, albeit at a slower pace.”
On a month-on-month basis, the headline index increased at a faster pace in February relative to January. The index increased by 2.3 per cent in February, roughly 1.4 percentage points from rates recorded in January, as all divisions that contribute to the index increased with the exception of the Restaurants and Hotels division increasing at a slower pace. On a month-on-month basis, both the Urban and Rural indices increased at a faster pace, as the Urban index increased by 3.0 per cent in February from 0.9 per cent in January, while the Rural index increased by 1.8 per cent from 0.9 per cent in January.
Reacting to the inflation developments yesterday, economists at Afrinvest West Africa, a Lagos based investment house, said “the record high Headline and sub-indices numbers were above our forecast but much in line with our expectation that inflation would remain broadly driven by structural supply-side/cost-push factors.
“This is likely to cause political backlash on the fiscal side and put question on the current monetary policy thrust of the CBN which appears to have given up the objective of price stability for an “induced” FX stability, trade protectionism and stimulating domestic manufacturing growth.’’
In several cities across the country prices of staple food items have increased significantly since this year with the traders complaining that exchange rate spike is also affecting them even when some of the commodities are local produce.
According to a market spot check conducted in some selected markets in the Kano city, a bag of satchet water that sold for N60 a few weeks ago, now cost N80. Similarly, a bag of foreign rice that used to go for N10, 000 is now selling for N15. 000, while local rice now sells at N8, 000, up from N5, 000.
In Kaduna, a measure of beans (derica) which sold for N200 in December, now sells for N350. Also a similar measure of imported rice rose from N350 in December to N450 at present. Similarly, Garri increased from N150 per measure to N250. Price of groundnut oil rose marginally from N250 per bottle to N280.
In Umuahia, the Abia State capital, prices of commodities ranging from beverages to toiletries, have also gone up significantly. Also prices of local food items have gone up. Prices of items such as Milo, Bournvita, detergents have increased by between 15 and 25 per cent and the sellers blamed it on the rise in exchange rate.
For things like rice and other food items, including garri and red oil that are produced locally the prices have also gone up by an average margin of 20 per cent.
