Jitters over NBS report amid worsening inflation

As Nigeria’s inflation rate for the month of August hit 20.52 per cent, many are afraid that their purchasing power might just be further eroded; BENJAMIN UMUTEME writes.

Since the beginning of 2022, Nigerians have been crying about the steady increase in the prices of goods and services. They felt that with the government revenues dwindling coupled with the unavailability of petrol, it was only a matter of time that everyone would begin to feel the pinch.

While Nigeria and Nigerians were going through the pains of a perennial fuel scarcity, out of the blues came the Russian invasion of Ukraine to further compound the country’s energy challenges.

Russia-Ukraine war

In February, this year, the world woke up to see that Russia had rolled their tanks crossing the borders into neighbouring Ukraine. According to the Russian authorities, the action became necessary to protect themselves. The immediate implication of that singular action was the disruptions of global food supply chain as both countries were strategic in food productions worldwide.

The Russian action brought in its wake sanctions from the US and its allies, thereby aggravating disruption to food and energy supply globally. With Russia, one of the world largest fuel producers unable to sell its fuel, it was only a matter of time before the impact of the war hit Nigeria hard.

August inflation report

In August 2022, on a year-on-year basis, the headline inflation rate was 20.52 per cent. This was 3.52 per cent points higher compared to the rate recorded in August 2021, which was (17.01%). This shows that the headline inflation rate increased in the month of August 2022 when compared to the same month in the preceding year (i.e. August 2021). Meaning that in August 2022, the general price level was 3.52% higher relative to August 2021.

On a month-on-month basis, the headline inflation rate in August 2022 was 1.77 per cent; this was 0.05 per cent lower than the rate recorded in July 2022 (1.82%). This means that in August 2022 the headline inflation rate (month–on–month basis) declined by 0.05 per cent.

The percentage change in the average CPI for the twelve months period ending August 2022 over the average of the CPI for the previous twelve months period was 17.07 per cent, showing a 0.47 per cent increase compared to 16.60 per cent recorded in August 2021.

Urban inflation

On a year-on-year basis, in August 2022, the urban inflation rate was 20.95 per cent, this was 3.36 per cent higher compared to 17.59 per cent recorded in August 2021. On a month -on-month basis, the urban inflation rate was 1.79 per cent in August 2022, this was a 0.03 per cent decline compared to July 2022 (1.82%). The corresponding twelve-month average for the urban inflation rate was 17.59 per cent in August 2022. This was 0.4 per cent higher compared to 17.19 per cent reported in August 2021.

Rural inflation

The rural inflation rate in August 2022 was 20.12 per cent on a year-on-year basis; this was 3.69 per cent higher compared to 16.43 per cent recorded in August 2021. On a month-on-month basis, the rural inflation rate in August 2022 was 1.75 per cent, down by 0.06 per cent compared to July 2022 (1.81%). The corresponding twelve-month average for the rural inflation rate in August 2022 was 16.58 per cent; this was 0.55 per cent higher compared to 16.03 per cent recorded in August 2021.

Food index

The food inflation rate in August 2022 was 23.12 per cent on a year-on-year basis; which was 2.82 per cent higher compared to the rate recorded in August 2021 (20.30%).This rise in the food inflation was caused by increases in prices of Bread and cereals, food product – potatoes, yam and other tuber, fish, meat, oil and fat.

On a month-on-month basis, the food inflation rate in August was 1.98 per cent, this was a 0.07 per cent decline compared to the rate recorded in July 2022 (2.04%). This decline is attributed to reduction in prices of some food items like tubers, garri, local rice, and vegetables.

The average annual rate of food inflation for the twelve-month period ending August 2022 over the previous twelve-month average was 19.02 per cent, which was a 1.48per cent decline from the average annual rate of change recorded in August 2021 (20.50%).

Core inflation

The ‘’All items less farm produce’’ or Core inflation, which excludes the prices of volatile agricultural produce stood at 17.20 per cent in August 2022 on a year-on-year basis; up by 3.79 per cent when compared to 13.41 per cent recorded in August 2021.

On a month-on-month basis, the core inflation rate was 1.59 per cent in August 2022. This was down by 0.17% when compared to 1.75 per cent recorded in July 2022.

The highest increases were recorded in prices of gas, liquid fuel, solid fuel, passenger transport by road, passenger transport by air, fuel and lubricants for personal transport equipment, cleaning, repair and hire of clothing.

The average 12-month annual inflation rate was 14.60% for the twelve-month period ending August 2022; this was 2.31% higher than the 12.29% recorded in August 2021.

States’ profiles

In August 2022, all items inflation rate on a year-on-year basis was highest in Ebonyi (25.33%), Rivers (23.70%), Bayelsa (23.01%), while Jigawa (17.30%), Borno (17.56%) and Zamfara (18.04%) recorded the slowest rise in headline Year-on-Year inflation.

On a month-on-month basis, however, August 2022 recorded the highest increases in Anambra (2.78%), Ondo (2.53%), Nasarawa (2.40 %), while Yobe (0.68%), Borno (0.84) and Zamfara (0.98%) recorded the slowest rise on month-on-month inflation.

Food inflation

In August 2022, food inflation on a year-on-year basis was highest in Kwara (30.80%), Ebonyi (28.06%) and Rivers (27.64%), while Jigawa (17.77%), Zamfara (18.79%) and Oyo (19.80%) recorded the slowest rise on year-on-year food inflation.

On a month-on-month basis, however, August 2022 food inflation was highest in Anambra (3.05%), Ondo (2.92%) and Bauchi (2.78%), while Yobe (0.46%), Oyo (0.89%) and Delta (0.94%) recorded the slowest rise on month-on-month inflation.

Rising global inflation

The CPI report released Thursday afternoon only goes to confirm what experts have been thinking.

In a chat with Blueprint, a professor of the Capital Market at the Nasarawa State University, Uche Uwaleke, said the rise in inflation rates to 20.52 per cent did not come as a surprise due to rising global inflation occasioned by the Russia-Ukraine war.

“The increase in headline inflation above the psychological threshold of 20% did not come as a surprise in view of the rising inflation trend in many economies partly caused by the Russian Ukrainian conflict.

“It’s interesting to note that the NBS, in its latest CPI report, provided a clue as to the major factors driving the inflationary pressure in Nigeria namely supply disruptions and rising cost of production,” he said.

In the report, NBS had said disruption in the supply of food products; increase in import cost due to the persistent currency depreciation and general increase in the cost of production was responsible for increase in the increase in rates.

While noting that the recent CBN policy tightening has not yielded the desired result, Uwaleke said the needs to come up with policies that will boost local food production.

“In the light of this revelation, what becomes clear is that the recent monetary policy tightening stance of the CBN alone may not address the challenge. The government needs to formulate and implement complementary fiscal policies aimed at boosting food supply as well as reducing firm’s cost of production,” he added.

For the chief executive officer of Financial Derivatives Company, Bismarck Rewane, consumers must prepare as inflation continues its upward trajectory.

He said: “The consumers have to prepare themselves, we are going into a planting season, we are going into minimum wage negotiation, we are going into budgetary spending, we have to prepare ourselves for an increase in inflation after 17 months of consecutive decline, inflation is set to start increasing from next month. There is no question about that; that is the likely outcome.”

Even global lender International Monetary Fund (IMF) in a recent report warned that galloping global inflation is not likely to abate anything son especially with high energy and food prices.

According to the Bretton Wood Institute, food and energy are the main drivers of this inflation.

“Since the start of 2021, the average contributions just from food exceed the overall average rate of inflation during 2016-2020.

“In other words, food inflation alone has eroded global living standards at the same rate as inflation of all consumption did in the five years immediately before the pandemic.

“A similar story holds for energy costs, which show up both directly and indirectly, through higher transportation costs. And the relative impact of food, energy, and other items in driving inflation vary considerably across countries,” the report indicated.