The decline in inflation rate, a measure of the average change in prices of goods and commodities has been described as one that has gone beyond the theory of supply and demand. Foremost economist and member of the federal economic council, Bismarck Rewane has summed the situation up as defying market reality.
This is as the National Bureau for Statistics (NBS) is scheduled to release theOctober inflation figures today.
Rewane, Chief Operating Officer (COO) of Financial Derivatives (FDC) Company Limited said, “While the historical inflation data has maintained a downward trend in the last seven months, our survey of the Lagos commodity markets show that in reality, commodity prices are surging. Lagos state accounts for about 25 to 30 per cent of national Gross Domestic Product (GDP).
“Hence, it is a true representation of the Nigerian economy. Currency pressures, rising global commodity prices and higher logistics costs continue to take a toll on domestic commodity prices”.
For instance, the price of a 12.5kg cooking gas has jumped by 191 per cent to N10,200 Year-to-Date (YTD), resulting in a switch to alternative energy sources such as charcoal and kerosene (cross elasticity of demand) and compounding the dilemma of higher food prices.
Rewane, in the latest FDC publication said, as commodity prices rise faster than wages, consumers spending patterns are being influenced by inflation psychology.
“This is a situation where consumers spend more quickly than they otherwise would in the belief that prices will keep rising. This is further fueling inflationary pressures,” he explained.
