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Inflation rate skyrockets to 6-year high

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By Emeka Anaeto, Economy Editor
The skyrocketing prices of goods and services across the country has reflected in Nigeria’s inflation rate climbing to a near six-year high of 13.7 percent in April, 2016, 0.9 percentage point higher than the previous month’s level of 12.8 per cent.
The cost-push inflation is driven primarily by the severe scarcity of petroleum products which had forced increases in transportation cost and consequently, arbitrary increases in cost of all other commodities and services consistently for several months now.
National Bureau of Statistics, NBS, in a report yesterday, said the April inflation reading, the highest level since August 2010, reflected increases across all sectors, unlike the previous months which had one or two sectoral exceptions.


‘‘Lingering structural constraints continue to manifest spill overs in April as electricity rates, kerosene prices, the impact of higher PMS (petrol) prices and vehicle spare parts were the largest contributors to the Core Sub index during the month’’, NBS stated.
These items as well as other imported items, according to NBS, continued to have ripple effects across many divisions that contribute to the Core Consumer Price Index.
Food index reflected tighter supplies across most groups that contribute to the sub-index. The sub-index increased by 13.2 per cent in April, up by 0.4 percentage point from rates recorded in March as all major food groups which contribute to the Food sub-index increased at a faster pace driven by higher prices in Fish, Bread/Cereals, and Vegetables groups.
Year-on-year, both the Urban and Rural indices recorded marked increases for the third consecutive month. The Urban index rose by 15.1 per cent, 1.6 percentage points from 13.5 per cent in March, while upward pressure on prices were relatively less severe in the rural areas as the index increased 12.8 per cent year-on-year, 0.7 percentage point from 12.0 per cent in March.
NBS also stated that increases in imported as well as domestically produced foods resulted in a higher increase in the Food Sub-index in April, adding that all groups which contribute to the index increased during the month with the exception of the Fruit and Potatoes, Yams and Other Tuber groups.
The latest inflation report indicates worsening economic conditions in the country where gross domestic product, GDP, growth was just 2.8 percent as at last quarter of 2015, its lowest rate since 1999, and speculation of a further decline in the first quarter and first half 2016 is popular among economy analysts.
With the current inflation rate the Central Bank of Nigeria, CBN, appears to have been pushed to the wall once again on its benchmark interest rate as the existing Monetary Policy Rate of 12 per cent is now grossly negative.
The apex bank had shifted the benchmark rate to 12 per cent from 11 per cent previous month when the inflation rate surpassed it, a situation which renders interest rates not only negative but a disincentive to savings.
Also the present inflation rate has surpassed the apex bank’s inflation target maximum of 9.6 per cent by a huge gap of 4.1 percentage points, thereby complicating the inflation targeting strategy of its monetary policy measures.
With this development many financial analysts would be expecting the next week’s Monetary Policy Committee, MPC, meeting of the apex bank to fundamentally overhaul its policy framework.
Part of the overhaul would also include the foreign exchange market structure and possibly the exchange rate considerations where official devaluation is speculated to be much on the card.

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