By Joy Obakeye `
Nigeria’s inflation rate surged to 21.47 per cent in November from 21.09 per cent recorded in October, representing the 10th consecutively monthly increase since the start of the year.
This was disclosed by the National Bureau of Statistics (NBS) in its Consumer price index (CPI) report which measured the monthly change in prices.
The report explained that the increase in the monthly inflation rate (month-on-month basis) is attributed to higher demand, usually experience during the festive season, stressing that the increase was attributed to an increase in prices of some food items like Oil and fat, Fruits, Fish and Tubers.
“The All-item Index (Headline Inflation rate) in November 2022 on a year-on-year basis, stood at 21.47%. This was 6.07% points higher compared to the rate recorded in November 2021, which was (15.40%). This shows that the headline inflation rate increased in November 2022 when compared to the same month in the preceding year (i.e., November 2021) by 6.07%.
According to the report, “The increase in the general price level in the annual inflation rate (Year-on-Year) can be attributed to an increase in the cost of importation due to the continual currency depreciation and a General increase in the cost of production due to a surge in energy cost.
“While on a month-on-month basis, the Headline inflation rate I”n November 2022 was 1.39%, which was 0.15% higher than the rate recorded in October 2022 (1.24%). The increase in the monthly inflation rate (month-on-month basis) is attributed to higher demand, usually experience during the festive season.”
The report noted that the percentage change in the average CPI for the twelve months ending November 2022 over the average of the CPI for the previous twelve months period was 18.37%, showing a 1.39% increase compared to the 16.98% recorded in November 2021.
“The components that made up the food sub-index in November 2022 2022 was 24.13% on a year-on-year basis; which was 6.92% higher compared to the rate recorded in November 2021 (17.21%). The rise in the food sub-index was caused by the increases in prices of Bread and cereals, Oil and fat, Potatoes, yam and other tubers, Food products n.e.c, and fish.”
“Whereas the month-on-month food inflation rate in November was 1.40%, this was 0.17% higher compared to the rate recorded in October 2022 (1.23%). The increase was attributed to an increase in prices of some food items like Oil and fat, Fruits, Fish and Tubers.”
“The average annual rate of food inflation for the twelve-month ending November 2022 was 20.41%. This is 0.21% points decline from the annual rate of change recorded in November 2021 (20.62%).”
“All-items index less farm produce, which excludes the prices of volatile agricultural produce stood at 18.24% in November 2022 on a year-on-year basis; showing a rise of 4.39% when compared to 13.85% recorded in November 2021.
On a month-on-month basis, the core inflation rate was 1.67% in November 2022, while the rate was 0.93% in October 2022. This shows a rise of 0.74%. The highest increases were recorded in prices of Gas, Liquid fuel, Passenger transport by Air, vehicle spare parts, and Solid fuel.
The percentage change in the average CPI for the twelve months ending November 2022 was 15.69%, which was 2.73% points higher than the previous twelve months period which recorded 12.96% in November 2021.
The urban consumers’ inflation rate for November 2022 on a year-on-year basis stood at 22.09%. This was 6.17% higher compared to the 15.92% recorded in November 2021.
While on a month-on-month basis, the urban inflation rate was 1.50% in November 2022, this was 0.16% higher compared to October 2022 (1.33%).
Commenting on the November inflation rate Director Centre for the Promotion of Private Enterprise CPPE, Dr Muda Yusuf said “over the last one year, the Nigeria inflation story has been a depressing one as reflected in the dynamics of all key price metrics. The key inflation drivers have not changed over the last few years.
They include the following: the depreciating exchange rate, rising transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, climate change, insecurity ravaging farming communities and structural constraints to economic activities. Fiscal deficit financing by the CBN is also a significant factor fuelling inflation through high liquidity injection into the economy “Tapering of monetary easing in the advanced economies is also driving imported inflation and the depreciation in the exchange rate.
Consequences of soaring inflation include the following: erosion of purchasing power of citizens as real incomes collapse; mounting poverty; escalation of production costs which negatively impacts profitability; shrinking shareholder value in many businesses; waning of investors’ confidence and dwindling manufacturing capacity utilisation.
Taming inflation demands urgent government intervention to fix= supply side constraints in the economy. Tackling production and productivity constraints, fixing the dysfunctional forex policy, and reducing liquidity injection through ways and means funding of fiscal deficit. Meanwhile, the CBN should resist the temptation of further monetary policy tightening.
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The deployment of monetary tightening tools should be put on pause. The Nigerian economy is not a credit-driven economy which is why the tightening outcomes has been inconsequential as a tool to tame inflation.
As at October 2022, credit to the private sector as a percentage of GDP was 22.7 per cent in Nigeria. The percentages for other countries in 2020 according to world bank were 32% in Kenya; 96% in Morocco; 193 per cent in Japan; 143 per cent in the UK; 216 per cent in the United States; and 39% was average for sub-Sahara Africa. This underscores the need for variabilities in policy responses.
Inflation had been spiking despite the serial monetary tightening. Sustained tightening penalises entrepreneurs especially the real sector, and increases the cost of credit with heightened prospects of a backlash on growth. Inflation-restraining strategies should accordingly focus on productivity-boosting supply-side factors and reduction in ways and means funding of deficit.
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