By Peter Egwuatu, Victor Young, Godfrey Bivbere & Elizabeth Adegbesan, LAGOS
Nigerians are gasping for breath as the inflation rate rose by 0.92 basis points to 20.52 per cent in August from 19.6 per cent in July, the highest since October 2005.
This represents the seventh consecutive monthly rise in Headline inflation since February. Food inflation also rose to 23.12 per cent in August 2022, representing a 1.1 percentage-point increase compared to 22.02 per cent recorded in the previous month.
In its Consumers Price Index, CPI, report for August, the National Bureau of Statistics (NBS) said the “increases were recorded in all divisions that yielded the headline index”.
The Bureau stated: “In August 2022, on a year-on-year basis, the headline inflation rate was 20.52 per cent. This was 3.52 percentage points higher compared to the rate recorded in August 2021, which was 17.01 per cent.
“This shows that the headline inflation rate increased in the month of August 2022 when compared to the same month in the preceding year (August 2021). On a month-on-month basis, the Headline inflation rate in August 2022 was 1.77 per cent, this was 0.05 per cent lower than the rate recorded in July 2022 (1.82 per cent).”
On food inflation, NBS further reported: “The food inflation rate in August 2022 was 23.12 percent on a year-on-year basis; which was 2.82 percent higher compared to the rate recorded in August 2021 (20.3 percent).
“This rise in food inflation was caused by increases in prices of bread and cereals, food products, potatoes, yam, and another tuber, fish, meat, oil, and fat. On a month-on-month basis, the food inflation rate in August was 1.98 percent, this was a 0.07 percent decline compared to the rate recorded in July 2022 (2.04 percent). This decline is attributed to a reduction in prices of some food items like yam tubers, garri, local rice, and vegetables.”
In addition to the reasons advanced by NBS, several experts who spoke to Vanguard listed other inflationary pressure points, while recommending some solutions.
Monetary policy not enough — Uwaleke
Professor of Capital Market at Nasarawa State University, Keffi, Uche Uwaleke, reacting to the rise in inflation by 20.52% the highest in two decades, said: “The increase in headline inflation above the psychological threshold of 20% did not come as a surprise in view of the rising inflation trend in many economies, partly caused by the Russian-Ukrainian conflict.
“It’s interesting to note that the NBS, in its latest CPI report, provided a clue as to the major factors driving the inflationary pressure in Nigeria, namely supply disruptions and rising cost of production. In the light of this revelation, what becomes clear is that the recent monetary policy tightening stance of the CBN alone may not address the challenge. The government needs to formulate and implement complementary fiscal policies aimed at boosting food supply as well as reducing firm’s cost of production.”
Rise in MPR a major concern — Kurfi
In his reaction, analyst and Chief Executive Officer, APT Securities & Funds Limited, Mallam Garba Kurfi, said: “I am not surprised with the outcome but I hope it will not further go up as harvesting of our agricultural products will likely push the food cost down. Equally the price of other foods, especially, wheat is globally coming down. We are expecting inflation to fall before the end of the year. But of more concern is the increase of the Monetary Policy Rate, MPR, in the last two consecutive sittings of the Monetary Policy Committee, MPC. We hope the monetary authorities will keep the rate the same for the rest of the year.”
Supply side factors, forex drive inflation —Olayinka
Reacting as well, analyst and CEO, Wyoming Capital and Partners, Tajudeen Olayinka, said: “20.52% inflation number for the month of August 2022, is an indication that demand-side management tools being deployed by CBN to tame inflation in Nigeria may actually be aggravating the situation, given the fact that most of the factors responsible for inflation in Nigeria are traceable to the supply side of the economy. These supply side factors had been there and largely unresolved before the emergence of imported inflation that came as a result of the Russian war on Ukraine.
“Foreign exchange scarcity and exchange rate mismanagement; unending insecurity and limited access to farms; crude oil theft and inability to meet OPEC production quota; high cost of raw materials; infrastructure deficit; highly elevated cost of capital in the economy are some of the dangerous factors bedeviling Nigerian economy. So, it will be difficult for CBN’s demand side management tools to solve the problem. Unfortunately, the fiscal side is weak, with no positive contribution to make at this time, other than to engage in excessive borrowing and fiscal rascality. That is also driving up inflation.”
He further said: “This is not to say CBN is not aware of possible failure of its demand side management tools, or that raising interest rate will not sufficiently address the current inflationary pressure, but because it must also act to address possible threats of reversal of capital flow, arising largely from interest rate hike in Europe and America. These are the issues.”
To solve the inflation rate problem, Olayinka, said: “So, solving this problem requires that global inflationary threat is dealt with by the more advanced economies, while Nigeria’s fiscal authority continues to search for solutions to supply side problems it created. Impact of high inflation is better imagined than real; more people are now being dragged into poverty because of poor purchasing power; unemployment will rise as a result. This will further hurt the economy.”
NLC seeks cost of living allowance
Meanwhile, President of Nigeria Labour Congress, NLC, Ayuba Wabba, has demanded for payment of cost of living allowance to workers and others to cushion the effects of the rising inflation.
According to him, “the high inflation is a pointer to the fact that the economy is not healthy. It also clearly shows the level of the challenge of the economy.
“Basically, it is also the evidence that the cost of goods and services especially foods and every item has gone haywire. It is a reflection of also the value of our currency. The value of our currency has continued to be on a free fall and all of this put together is what is reflected in the inflation data released. With all of these, it is the workers that are on fixed wages that are at the receiving end and basically, we now have a pool of the working poor because of the fact that it is difficult for people to have ends meet.
“The facts are very obvious. To me, it is even an understatement to say that it is at the level of 20 percent especially.
Two days ago, I went to buy a loaf of bread in Abuja, a bread that used to be N250 moved to N500. Now, a loaf of bread is now N800/900. So, imagine somebody on N30, 000; how does he survive? It is really a difficult situation, that is why many countries around the world are paying what they called cost of living allowances and we have urged the government to look at it. Ghana recently paid 15 percent, South Africa paid to all workers some percentage to cushion the challenge of hyperinflation in the system which has also resulted to the high cost of living.”
Suspend new taxes, levies —NECA
Reacting, the Nigeria Employers’ Consultative Association, NECA, urged the government to suspend all forms of new taxes and levies to give a respite on the spiking production cost to tackle the rising inflation.
Speaking through its Director-General, Mr Wale Oyerinde, NECA contended that “it is apparent that the government’s intervention so far has not impacted the inflationary pressures that have kept rising.
He stated: “Around the globe, concerns about inflation have led many countries to consider an aggressive approach towards slowing down the economy. Consumers are also beginning to think twice about spending on goods and some services. In Nigeria, it is apparent that the government’s intervention so far has not impacted the inflationary pressures that have kept rising. Rather, some of these interventions have been counterproductive. The recently announced 20.52 percent inflation rate affirms the need for Government to take a second look at current strategies aimed at flattening the curve.
“The key drivers of inflation which includes, worsening currency depreciation, escalating transportation cost, high import duty on manufacturing inputs, security concerns among others have continued to crowd out the government’s interventions.
It leaves us to wonder whether these interventions are truly right for our peculiar challenges. With the crisis between Russia and Ukraine, the rising cost of energy around the world has translated to a significant uptrend being witnessed in most economies as prices of goods and services have reached unprecedented levels.
“To tackle inflation, all forms of new taxes and levies should be suspended to give a respite on the spiking production cost. There should also be deeper stakeholder engagements across sectors to develop an enduring strategy on the way forward. The federal government like its counterpart in other climes must be responsive and deliberate in its efforts to flatten the inflationary pressures.”
Govt policies fuelling inflation—NAGAFF boss
Reacting, former National President of National Association of Government Approved Freight Forwarders, NAGAFF, Eugene Nweke, has blamed the Federal Government’s economic policy for the sharp rise in inflation rate.
Speaking with Vanguard on the inflationary situation Nweke said the inflation rate rise will further force companies in the maritime sector to close shops or down-size their workforce.
He said: “The closure of companies will further drive more citizens into poverty. Already the sector is struggling and the government policies are not helping. The ports being the gateway for trading and most goods imported are consumables; The scarce foreign exchange will drive up the cost of goods which will in turn drive up inflation.”