The reversing gear of inflation in Nigeria’s economy
Inflation, inflation, and inflation. This word is the foremost economic and economist’s terminology that does not escape being mentioned when discussing micro or macroeconomics. Generally, no serious economist - political economist or financial experts, would dare not to talk about it.
Inflation is scary, dreadful, and dangerous. It’s an economic bearing that reminds one what the positive and negative of electrical current to power appliances and machines are. To the capitalist, inflation stimulates the economy to grow, with positive impacts on manufacturing and business to rein in more funds.
And on the negative side, inflation reduces the purchasing power of the poor, denying them the necessary basic items of consumption.
Our fear is we can’t rule out how this double-digit inflation persists in 2022. With the hindsight that it will negatively impact and distort fiscal and monetary policy, bank long-term borrowing and lending, disrupt household consumptions, businesses investment, as well and crippled saving decisions.
That is why a critical interrogation of the recent inflation figure comes in handy as we plan and project for 2022.
The National Bureau of Statistics released Nigeria’s inflation figures for December 2021 recently. With the figure in uptick to 15.63% compared to the previous months, it is interesting to note that the inflation figures have been recording steady declines in eight successive months before the December 2021 figures.
The reality of the foregoing mentioned raise in the inflation rate shouldn’t come as a surprise to most economic analysts, development experts who are following up on Nigeria’s economic trajectory considering, especially, as concerns have always been raised on the government’s economic policy either at the micro or macro level.
Particularly, Nigeria’s consumer price index rose by 15.63% year-on-year in December 2021, compared to the rate of increase recorded in the preceding month (November 2021 – 15.4%) according to the NBS.
Although the rate released by NBS showed moderation from the high recorded in the previous years that leveraged on favourable base periods those do not reflect market reality across most Nigerian states.
Nigerians are asking what is fuelling inflation increases in the country? Specifically, they want to know how governments have not been able to tame this dreadful element in our economic life?
A breakdown of the report shows that food inflation, which accounts for all volatile agricultural produce increased by 0.16% points to 17.37% in December 2021 compared to 17.21% recorded in the previous month of November of the same year.
Majorly, the food commodities that are daily consumed by Nigerians such as bread, cereals, milk, meat, fish, potatoes, yam, and other tubers, soft drinks, and fruits.
On the other hand, the nonfood items are not left out in the inflation surge. The most popular are prices of cooking gas, electronics, clothes, shoes, transportation both air, and road, machines and equipment, liquid fuel.
Sadly, despite trillions of naira being spent as an intervention in agriculture, the increase in the food inflation rate and the surge in prices of bread and cereals, proteins foods like fish, meat, egg and beverages as reported by the NBS food price index.
Regrettably, the impacts of inflation metrics will continuously erode the purchasing power of Nigerians. Households are vulnerable and struggling to recover from covid-19 induce economic lockdown.
Fundamentally, an economist would always attribute demand and supply paradigms as factors that drive inflation, and most especially food price inflation. Apart from such what else if we considered other items are not in the range of foods commodities.
Although, a good note is recycled obvious structurally challenge’s in our clime, that have outshined every possible solution.
What can be done? Addressing food pressure inflation in Nigeria demands stronger security action against farmers-herders conflict and banditry phenomenon affecting farm produce segment across rural and urban food supply chain.
Another is a moderation breaker from the central bank tightening its monetary stance. Although the just concluded first Monetary Policy Committee (MPC) for 2022 retains the 11.5% interest rate and projects over 3% economic growth for the country.
Nevertheless, as it stands, unabating FX pressure on the naira in the currency market