Headline inflation rises to 22.41% in May

NIGERIA’s inflationary rate increased to 22.41 per cent in May from 22.22 per cent in April, according to the National Bureau of Statistics (NBS) Consumer Price Index for May 2023.

The report was released on Thursday, June 15.

The figure showed that the inflation rate increased by 0.19 per cent in May.

Compared to the same month in the previous year, the headline inflation rate rose by 4.70 per cent, higher than the 17.71 per cent recorded in May 2022.

The food inflation rate, a key component in the basket, rose to 24.82 per cent from 19.50 per cent in May 2022.

According to the statistics office, the rise in food inflation in the last one year, May 2022 to May 2023, was caused by increases in prices of oil and fat, yam and other tubers, bread and cereals, fish, potatoes, fruits, meat, vegetable, and spirit.

For instance, depending on the size, a loaf of bread which sold at about N600 as of May last year has risen to between N1,000 and N1,300, while at the same time, the minimum wage has remained static at N30,000 since December 2019.

The NBS further stated that the food inflation rate rose to 2.19 per cent in May, higher than the 2.13 per cent rate recorded in April.

Analysts are not expecting the rate for June to go lower following the Federal government’s removal of the fuel subsidy regime on May 29, and the unification of the exchange rate on June 14, with all the inflationary implications.

Arising from the development and the release of the May inflation figure, analysts who spoke with The ICIR examined the impact the policies would have on households, businesses and the economy.

According to the executive vice chairman of Highcap Securities Limited, David Adonri, the inflationary figure showed that the inflation rate had started moderating gradually.

Adonri believed the new policies that came in May and June would reverse the moderating trend in the interim until the economy adjusts to the new price levels.

He explained further that the inflation the policies (fuel subsidy removal and exchange rates unification) would precipitate should reduce the disposable income of households and escalate the cost of production.

“Businesses with inelastic demand for their products may not be able to pass the increased cost to consumers and will have to bear it,” he said.

He added that the policies, which he said are essentially demand management measures, may stifle aggregate demand in the short term but, in the long run, would eliminate structural rigidities and make the economy flexible.

He added, “If the economy is fully deregulated as the policies suggest, it will become more efficient and less corrupt. The economy can only enjoy these overdue corrections if the environment is secure.”

A lecturer at the Department of Finance, University of Lagos, Abu Noruwa, saw the exchange rates (forex) unification policy as having both negative and positive implications.

“Overall, this is a positive move. However, the government must manage the dynamics to restore confidence. The backlog of forex demands needs to be addressed, and government should be ready to supply forex to stabilise the exchange rate in the short term,” he said.



    He also believed the government should relax capital control and administrative bottlenecks, including unbanning the list of about 41 items prohibited for forex and complementing that with higher import duties, removing the need for certificate of capital importation, and preventing the parallel market rate from simply moving further away from the official market rate.

    Government, he said, should stop the demand for certain taxes and levies in foreign currency as it creates unnecessary forex demand without adding to supply.

    “The aggregate demand for forex across markets should reduce as a round-tripping incentive is removed, for instance, people who fake foreign travels just to get forex at discounted rates.

    “Also, Nigeria’s sovereign credit rating should improve if this is complemented with the right fiscal and monetary policies, thereby attracting more forex inflows and lowering the cost of borrowing,” Noruwa said.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

    Support the ICIR

    We invite you to support us to continue the work we do.

    Your support will strengthen journalism in Nigeria and help sustain our democracy.

    If you or someone you know has a lead, tip or personal experience about this report, our WhatsApp line is open and confidential for a conversation


    Please enter your comment!
    Please enter your name here

    Support the ICIR

    We need your support to produce excellent journalism at all times.

    - Advertisement


    - Advertisement