The persist spike in the price of Liquified Petroleum Gas (LPG), popularly known as cooking gas, the surreptitious increase of diesel price and the continuous funding of fiscal deficit by the monetary authorities will always fuel inflation rate, analysts at FBN Quest have warned.
“We see from the National Bureau of Statistics (NBS) report on Liquefied Petroleum Gas (LPG) prices that the average cost of refilling a 12.5kg cylinder increased by 76 per cent year-on-year (y/y) and by 0.3 per cent month-on-month( m/m) to an average of NGN7,332 in December ’21, from NGN7,308 in November”, said fBN Quest.
The Board of Directors of Nigeria LNG Limited (NLNG) this month approved the supply of 100 per cent of the company’s LPG production (propane and butane) to the Nigerian market. An increase in the supply of LPG is supposed to temper soaring prices of cooking gas nationwide, but has impacted little so far.
The NBS’s Automotive Gas Oil (diesel) price watch also shows that diesel prices recorded a 29 per cent y/y increase last month. Its National Household Kerosene price watch also shows a 32.7 per cent rise in price of kerosene to NGN468 per litre.
The selected food price watch report for December, a separate report by the NBS, shows y/y price increases in 42 of the 43 food items surveyed. Food production in Nigeria remains constrained by the persistent insecurity in major food-producing states. Other supply-side constraints are the poor infrastructure, post-harvest losses and poor storage culture, very limited farm mechanisation and logistic challenges. Limited fx availability for food importation also pushed imported food inflation up by 6bps to 17.34 per cent in December ’21.
In its development update for Nigeria last year, the World Bank noted that even if domestic food production improves, and supply and distribution constraints are eased, a combination of fx shortage, expansionary monetary policy and the monetary funding of the fiscal deficit will continue to generate inflationary pressures.
