4-Year historic inflation strains pockets

Impact on citizenry amid rising food prices

RECENT INFLATION NUMBERS published by the National Bureau of Statistics (NBS) has revealed that Nigeria’s headline inflation has climbed year on year for...

RECENT IN FLATION NUM BERS published by the National Bureau of Statistics (NBS) has revealed that Nigeria’s headline inflation has climbed year on year for the nineteenth consecutive month to 18.17% in March 2021, from 17.33% since Nigeria last recorded a fall in inflation numbers at 11.02% in August 2019, and reaching more than a 4-year high since January 2017 when the consumer price index, (CPI) which measures inflation increased to 18.72% . This indicates a 0.82% points higher than the 17.33 % recorded in February 2021.

The rise can be attributed to increase across all the 12 classifications of individual consumption by purpose as well as composite food index which remains a major driver behind acceleration of headline figure, rising by 22.95% in March 2021 as a result of increases in prices of bread and cereals, potatoes, yam and other tubers, meat, vegetable, fish, oils and fats and fruits compared to the 21.79% increase recorded the previous month.

However, prices of poultry products are at their highest levels. A kilogramme of chicken that was previously sold at N800 is now sold at N2000, while price of a crate of egg has doubled to N1500. Also, the recent chain of events around the economy which includes the weakening of the currency which in one way or another has led to the waning of the purchasing power of the naira was pointed at as a cause.

How are Nigerians faring in the face of rising prices and weak purchasing power? Now that the rate of inflation has found comfort over the economy and rising to double the supposed 6-9% target band of the CBN, it is no longer news that as headline inflation continues to be on the rise, it poses more threats to the local currency, putting strain on the pocket of the consumer. Consequently, if food and commodity prices are rising faster than wages, there will be a fall in real incomes of labour. Thus, higher inflation poses a risk to households with lower income.

NBS revealed that the core inflation which is excludes the prices of volatile agricultural produce stood at 12.67% in March 2021, up by 0.29% as against the previous record of 12.38% in February.

This was brought about as a result of increases recorded in prices of airline ticket, medical services and hospital bills, utilities in household dwellings and transport fares.

Others are pharmaceutical products, spare parts of vehicles, dental services, a rise in the prices of cars, the maintenance and repair of personal transport equipment as well grooming establishments and hairdressing salons across the country.

Steady drivers behind the increase in core inflation include the hike in the price of premium motor spirit (PMS) and the upward adjustment in electricity tariff among others.

The latest PMS price watch report shows that the average price paid by consumers increased by 18.76% year on year to N172.68 per litre in March 2021.

States with the highest average price of PMS were Lagos (N200.87 per litre), Ebonyi (N184.17 per litre) and Niger (N183.50 per litre) states respectively. In the month under review, the price rises recorded in the health segment such as the pharmaceuticals and medical services have continued to feature as leading drivers of core inflation.

In addition to supplyside constraints triggered by the ongoing pandemic, the worsening insecurity in the country, particularly in foodproducing areas, is limiting expected outcomes and further fueling food inflation as seen in the NBS report for the month of March 2021.

Recreational activities have picked up, but with limitations. An instance could be referred to the cinemas which are opened but operating with strict social distancing guidelines.

At the last monetary policy committee (MPC), the committee retained all parameters and reiterated its stance that inflationary pressure is mainly due to legacy structural factors across the economy and not largely associated with monetary factors.

But the CBN’s in-house estimates suggest that inflationary pressure is projected to moderate in the shortto-medium term, given the potential rebound in output growth, bolstered by the resumption of economic activities.

However, the underlying risks of the efficacy of the COVID-19 vaccines against known and newly emerging strains of the virus, the uncertainty as to whether the vaccines could help achieve herd immunity or not and unequal access to the vaccines are some of the headwinds that could undermine this forecast.

Price movements across the state profiles. In analysing the price movements across the states, inflation was recorded highest in Kogi (24.51%), Bauchi (22.24%) and Sokoto (20.70%) states, while Imo (16.08%), Kwara (15.34%) and Cross River (14.45%) states recorded the slowest rise in headline inflation year on year.

In addition, a monthly comparison has Rivers (2.62%), Gombe (2.14%) and Niger (2.12%) reporting the fastest rising amongst states, while Zamfara (0.60%), Yobe (0.26%) and Kebbi (0.45%) states recorded the slowest rise in headline inflation month on month, respectively.

During the month under review, NBS reported that food inflation on a year on year basis was highest in Kogi (29.71%), Sokoto (27.02%) and Ebonyi (26.59%) states, while Abuja (20.10%), Kebbi (19.98%) and Bauchi (18.61%) states recorded the slowest rise in year on year inflation.