…headline inflation declines amid CBN tightening
Nigeria is facing its worst cost of living crisis in about two decades following the surge of inflation to 27.33 per cent in October.
This is as recorded inflation in Kogi (34.20 per cent), Rivers (31.44 per cent), Lagos (31.23 per cent), Oyo (31.21 per cent), and Akwa Ibom (30.74 per cent) outpaced the national average by a distance.
October inflation is the highest rate recorded in the country since August 2005 when it was 28.2 per cent. It is also the 10th consecutive month that the price of goods and services has risen in the country in 2023.
Despite the persistent rise in the inflation rate, the Central Bank of Nigeria, on Wednesday, expressed optimism that the low rate of increase in the average price level in October compared to September 2023, was a pointer to the fact that its monetary policy stance to tighten rates and its money market reforms were yielding the desired effect.
While month-on-month headline inflation in October was 1.73 per cent, which was 0.37 percentage points lower than the rate recorded in September 2023 (2.10 per cent), it was still a 0.61 percentage point increase from the 26.72 per cent (year-on-year) that was recorded in September.
In its Consumer Price Index (October 2023) that was released on Wednesday, the National Bureau of Statistics said, “In October 2023, the headline inflation rate increased to 27.33 per cent relative to the September 2023 headline inflation rate which was 26.72 per cent.
“Looking at the movement, the October 2023 headline inflation rate showed an increase of 0.61 percentage points when compared to the September 2023 headline inflation rate.
“Furthermore, on a year-on-year basis, the headline inflation rate was 6.24 percentage points higher compared to the rate recorded in October 2022, which was (21.09 per cent). This shows that the headline inflation rate (year-on-year basis) increased in October 2023 when compared to the same month in the preceding year (i.e., October 2022).”
The major contributors to inflation were food and non-alcoholic beverages (14.16 per cent), housing, water, electricity gas and other fuel (4.57 per cent), clothing and footwear (2.09 per cent), transport (1.78 per cent), and furnishings and household equipment and maintenance (1.37 per cent).
Cost of living is worse in cities where urban inflation has risen to 29.29 per cent and a bit milder in rural areas where rural inflation rate in was 25.58 per cent (below the national average). Residents of Kogi (34.20 per cent), Rivers (31.44 per cent), Lagos (31.23 per cent) are spending more on goods and services as their inflation rates are well above the national average.
Inflation rate is lowest in Borno (20.06 per cent), Jigawa (23.52 per cent), Sokoto (24.47 per cent), Kebbi (24.48 per cent), and Katsina (24.56 per cent).
Food inflation rose to 31.52 per cent in the month, which was a 7.80 percentage points increase from the rate recorded in October 2022 (23.72 per cent). This is 0.88 percentage points higher than the 30.64 per cent recorded in September.
The cost of food is higher in Kogi (41.74 per cent), Kwara (38.48 per cent), and Lagos (37.37 per cent). It is cheaper in (24.41 per cent), Kebbi (24.90 per cent), and Jigawa (25.10 per cent). The continued rise in inflation has been attributed to the removal of petrol subsidies and the devaluation of the official exchange rate.
The Federal Government recently blamed insecurity, the unification of the foreign exchange market, and more as contributors to rising inflation.
In its 2024 – 2026 Medium-Term Expenditure Framework and Fiscal Strategy Paper, the government said, “The lingering insecurity in major food-producing areas; high cost of transportation driven by rising energy costs occasioned by petrol subsidy removal; activities of middlemen in the food distribution channels; as well as the persistence of shocks from legacy infrastructural bottlenecks, remain major drivers of the inflationary pressure.
“The unification of the Foreign Exchange market segments continues to weigh on consumer prices.”
The government expects inflation at 21.4 per cent in 2024, before further slowing in 2025 and 2026.
The continued increase in the prices of goods and services is affecting businesses and individuals who have to pay higher prices.
The Chief Executive Officer, Petroyal Apparel, Peter Adebiyi, while lamenting higher prices, told The THE TRACK MAGAZINE, “The fabrics I buy per yard for N2200/2300 are now N2800/3000, N8000/9000 now N10500/12000. This is impacting my business and customers since I now have to adjust my prices.”
According to an educator, Mrs Grace Onofomi, the prices of everything in the market have shot up drastically. She said, “The prices of things have shot up really. I bought Dano full milk at N4,800 recently. As of yesterday, it was N5,300. Everything in the market has gone up drastically. Spaghetti used to be N550, not it is N650/N700. Prices of sugar have also gone up. Household items, the price of tomatoes, rice, staples, and more are higher now.”
An Abia State-based banker, Irene Smith, decried how she is hardly able to survive on her current compensation package due to the skyrocketing cost of commodities.
She said, “My salary doesn’t even last up to two weeks anymore. When you get to the market you can’t even buy anything because of the way prices keep increasing.”
Also speaking, an Uyo based businesswoman, Josephine Umoren, said the rate at which the prices of commodities are going up is becoming unbearable. Umoren, who is a fashion and cosmetics entrepreneur lamented that in 2023 alone, the prices of certain commodities have almost tripled within six months.
She said, “My husband has been giving me N50,000 to go to the market every week for almost two years. I have told him that it is not enough anymore because prices keep increasing every day. These days whenever I go to shop for the family, I make sure I carry extra money because prices are so unsteady.”
In October, SBM Intelligence noted that 50 per cent of Nigerian minimum wage earners are spending all their salary on food.
Commenting on the issue on Wednesday, the spokesman of the CBN, Dr Isa AbdulMumin, highlighted that in October, prices started decelerating in September and have continued in October.
He said, “Moderation in month-on-month changes in prices observed in the headline, food, and core components of the consumer basket followed reforms in the money market and relative stability in the FX market.”
In October, the International Monetary Fund stated that inflation will slow Nigeria’s economic growth to 2.9 per cent in 2023.
Nigeria’s inflation rate is now higher than the World Bank’s prediction for the country. In its June 2023 edition of the Nigeria Development Update, the Washington-based bank predicted that inflation would hit 25 per cent in 2023 because of petrol subsidy removal in the country.
Already, high inflation has pushed four million Nigerians into poverty between January and May 2023, the global bank noted that 7.1 million more Nigerians are expected to enter into the poverty net if the Federal Government fails to ask following the removal of fuel subsidy.
Nigeria’s headline inflation is now on track to hit 30 per cent by the end of the year as predicted recently by KPMG and Stears Business. The firms expect fuel subsidy removal and foreign exchange liberalisation to continue to drive headline inflation in the country.
Commenting on the surge in inflation rate, the Deputy President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, noted that the unrelenting inflationary pressure in the economy implies that the country is now facing runaway inflation.
He also affirmed that inflation is likely to surge to 30 per cent before the end of the year.
Idahosa said, “It (inflation) could go up to 30 per cent or more before the end of the year. It depends on what happens within the next two months. It may not be exactly 30 per cent. It could be 31 per cent or 29 per cent, depending on what happens.
“That’s the thing with inflation. It is very difficult to turn it around because if you look at all the factors causing it, from diesel to foreign exchange, most of these things are not within the control of the government. So, it is already a runaway inflation.”
An economist at Olabisi Onabanjo University, Prof Sheriffdeen Tella, noted that every increase in inflation statistics implies that more Nigerians are being pushed into poverty.
He said, “Apart from more being dragged into the poverty net, production will fall because people will start adjusting their consumption towards basic things like food. They may not even care about clothes. That is why in recent times the manufacturers association said that they have some goods that they cannot sell.”
Experts are now turning their attention to the CBN to see what its next Monetary Policy Committee decision will be, following its silence in recent months.