According to a monthly report by the National Bureau of Statistics, Nigeria’s consumer price index has indicated a decline in the inflation rate from 17.38 per cent in July to 17.01 per cent in August of 2021.
According to numbers released yesterday, this is 0.37 percentage points lower than the rate reported in July 2021 (17.38%). Even though rates have fallen since April 2021, an on-the-spot survey of commodity prices across Nigerian markets shows that prices are still skyrocketing.
Analysts feel that inflation in Nigeria is still a contentious issue, with many claiming that the government-owned statistics bureau’s data do not reflect actual consumer pricing in the country.
However, according to the most recent NBS report, rises were seen in all COICOP divisions that produced the Headline index. The Headline index climbed by 1.02 per cent month over month in August 2021, which is 0.09 per cent more than the rate of 0.93 per cent in July 2021.
The average composite CPI for the twelve months ending August 2021 was 16.60 per cent higher than the average of the price index for the preceding twelve months period, up 0.30 per cent from 16.30 per cent in July 2021.
In August 2021, the urban inflation rate went from 18.01 per cent in July 2021 to 17.59 per cent in August 2021, while the rural inflation rate increased from 16.75 per cent in July 2021 to 16.43 per cent in August 2021.
Many observers warn that the government must step up efforts to combat the insecurity that is jeopardizing Nigeria’s food security. The urban index increased by 1.06 per cent in August 2021, up from 0.98 per cent in July 2021, whereas the rural index increased by 0.99 per cent in August 2021, up from 0.87 per cent in July 2021.
In August 2021, the equivalent twelve-month year-on-year average percentage change for the urban index is 17.19%. This is higher than the 16.89 per cent reported in July 2021, and the comparable rural inflation rate is 16.03 per cent in August 2021, compared to 15.73 per cent in July 2021.
Dr Muda Yusuf, an economist and former director-general of the Lagos Chamber of Commerce and Industry (LCCI), remarked, “The marginal drop in August headline inflation by 0.37 per cent to 17.01 per cent (year on year) is notable”.
“Equally noteworthy is the consistency of the composite price index over the past four months”.
Yusuf noted, “but these declines remain very marginal and raise the question of materiality. Headline inflation at over 17 per cent is still quite high and remains a cause for concern. The major inflation drivers have not abated”.
“These factors include transportation costs, logistics challenges, exchange rate depreciation, forex liquidity issues, hike in energy prices, climate change, insecurity in many farming communities and structural bottlenecks to production. These are supply-side issues. Any mitigation measures would have to be situated in the context of these factors”.
He added: “The heightened fiscal deficit financing by the CBN could be another potent inflation driver. The financing of fiscal deficit has been elevated to disturbing levels with huge implications for money supply and the consequent effect on inflation. CBN financing of the deficit is high powered money and therefore very inflationary.
“Mounting inflationary pressures weaken the purchasing power of citizens as real incomes are eroded, it aggravates pressure on production costs, negatively impacts profitability, erodes shareholders’ value and undermines investor confidence”.
“In many circumstances, increases in production costs cannot be passed on to consumers,” he stated. The inference is that manufacturers will suffer as well. Where the demand for the product is elastic, this is more pronounced. Consumers can easily live without these things.
“Tackling inflation necessitates immediate government intervention to address the supply-side problems and the moderation of fiscal deficit monetisation”.