BY BAMIDELE FAMOOFO
Nigeria’s headline inflation is estimated to increase again in April by 0.63 percent to 22.67 percent from 22.04 percent in March. This is according to the outcome of a market survey report released by the Financial Derivatives Company Limited at the weekend.
The report also disclosed that month-on-month inflation will inch up to 0.42 percent to 2.29 percent in April from 1.87 percent in March.
The implication is that more Nigerians will be impoverished as purchasing power of consumers is fast diminishing.
“Consumer price inflation has increased sharply since the Russia- Ukraine war in February 2022, disrupting energy and commodity prices. The major inflation culprit this time will be the planting season, which is reducing commodity supply. This is being compounded by a boost in aggregate demand (Easter and Ramadan celebrations) and an increase in liquidity (reintroduction of old Naira notes).
Food inflation is expected to spike by 0.17 to 24.62% from 24.45% in March,” FDC noted.
However, core inflation, which is inflation less seasonal, is projected to moderate marginally by 0.2 percent to 19.66 percent in April from 19.86 percent in March. This would be largely supported by the relatively stable exchange rate and the decline in diesel prices. After reaching a peak of N870, the price of diesel plunged to N640 in April, supporting the moderation in logistic costs.
Despite the deceleration in the global food index for 12 consecutive months (129 points) and relatively stable exchange rate, both imported and locally produced commodities in Nigeria have remained high. The increase in domestic food prices is primarily as a result of supply shortfalls due to the planting season while the rise in imported commodity prices is largely due to the transmission lag between global events and the impact in the domestic economy.
Core inflation (inflation less seasonalities) is expected to decline marginally by 0.2 percent to 19.66 percent in April from 19.86 percent in March. This would be largely supported by the relatively stable exchange rate and moderating logistics costs (lower diesel prices).
Diesel, which accounts for over 30 percent of firms’ logistics costs, declined by 35 percent to N640/litre in April while the exchange rate appreciated by 1.33 percent in the same period.
Most Central Banks have been aggressive in the fight against spiraling inflation in the last year as supply chain disruptions due to the Russia-Ukraine war exacerbated inflationary pressures. However, in recent times, the gradual slowdown in consumer price inflation especially in advanced economies is forcing policymakers to rethink policy direction.
At the recently concluded meeting, the US Fed raised the benchmark interest rates by only 25bps and signaled a possible halt in interest rate hikes.
“However, Nigerian inflation has remained stubbornly high despite the CBN’s hawkish monetary policy stance. If our projections are accurate, inflation will be 13.67 percent above the upper band of the CBN’s inflation target (9%). This is raising questions as to whether the Nigerian MPC will go in the US direction or maintain its aggressive monetary policy stance at the next MPC meeting on May 22/23,” said FDC.
The Consumer Price Index which measures the rate of change in prices of goods and commodities sustained its upward trajectory to 22.04 per cent in March compared to 21.91 per cent in the preceding month, the National Bureau of Statistics said on April 5.
The NBS in its CPI report for March attributed the 0.13 percentage point increase in the headline index to the rise in the prices of food and commodities.
“The report also disclosed that month-on-month inflation will inch up to 0.42 percent to 2.29 percent in April from 1.87 percent in March”
Year-on-year, the inflation rate was 6.13 per cent higher compared to 15.92 per cent in March 2022.
The report showed that food inflation rose to 24.45 per cent year-on-year, which was 7.25 per cent higher than the 17.20 per cent recorded in March 2022.
The food inflation was attributed to increases in prices of oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruits, meat, vegetables, and spirits.
On a month-on-month basis, the food index increased to 2.07 per cent, which was 0.16per cent higher compared to 1.90 per cent in February.
The average annual rate of food inflation for the 12 months ending March 2023 over the previous 12 months’ average was 22.72 per cent, which was a 3.50 per cent increase from the 19.21 per cent average annual rate of change recorded in March 2022.
On the other hand, core inflation, which excludes the prices of volatile agricultural produce, increased to 19.86 per cent year-on-year, up by 5.94 per cent when compared to the 13.91 per cent recorded in March 2022.
According to the statistical agency, the highest increases were recorded in prices of gas, passenger transport by air, liquid fuel, fuels, and lubricants for personal transport equipment, vehicles spare parts, maintenance, and repair of personal transport equipment, medical services, passenger transport by road, among others.
Month-on-month basis, core inflation rose to 1.84 per cent up by 0.78 per cent from 1.06 per cent in February.
The average 12 monthly annual inflation rate was 17.41 per cent for the 12 months ending March 2023, which was 3.85 per cent higher than the 13.56 per cent recorded in March 2022.
Urban inflation’s year-on-year increased to 23.07 per cent, which was 6.63 per cent higher compared to the 16.44 per cent recorded in March 2022 while month-on-month, the urban inflation rate was 2 per cent in March, representing a 0.15 per cent increase compared to 1.85 per cent in February.
Similarly, the rural inflation rate year-on-year rose to 21.09 per cent, which was 5.67 per cent higher than the 15.42 per cent recorded in March 2022 while on a month-on-month basis, the rural index was 1.72 per cent, up by 0.14 per cent, compared to 1.58 per cent in February.
On the state level, however, general inflation year-on-year was highest in Ondo (25.38 per cent), Bayelsa (24.80 per cent), Lagos (24.66 per cent), while Borno (19.18 per cent), Cross River/Sokoto (19.24 per cent) and Benue (20.01 per cent) recorded the slowest rise in headline inflation.
On a month-on-month basis, the highest increases in were recorded in Bayelsa (2.58 per cent); Nasarawa (2.54 per cent); Lagos (2.41 per cent); while Anambra (1.03 per cent); Ebonyi (1.14 per cent); and Zamfara (1.27 per cent) recorded the slowest rise.
On the other hand, food inflation year-on-year was highest in Kwara, (28.84 per cent); Ondo (28.22 per cent); and Lagos (27.92 per cent); while Sokoto (18.99 per cent); Zamfara (20.57 per cent); and Plateau (21.38 per cent) recorded the slowest rise in the food index.
On month-on-month, food inflation was highest in Bayelsa (3.11 per cent), Rivers (3.00 per cent), and Ondo (2.98 per cent), while Bauchi (1.03 per cent), Zamfara (1.08 per cent); and Ogun (1.13 per cent) recorded the slowest rise.
