COST of living is rising rapidly in Nigeria as headline inflation rate rose to 15.75 percent in December 2020 as against 14.89 percent in the previous month, data released by the National Bureau of Statistics (NBS) on Friday said.
The December rate represents the highest inflation figure recorded in the last 33 months.
Food is also not getting cheaper for poor Nigerians as composite food inflation rose to 19.56 percent in December, compared to 18.30 percent in November.
“This rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats,” the NBS explained.
Similarly, core inflation, which excludes changes in food and energy prices, stood at 11.37 percent in December 2020, up by 0.32 percent when compared with 11.05 percent recorded in November.
Inflation or consumer price index (CPI) measures the average over-time changes in prices of goods and services consumed by people on day-to-day basis. It estimates monthly changes in prices of food, transport, and health, among others.
The NBS said the highest increases over the month were recorded in prices of passenger transport by air, medical services, hospital services, shoes and other footwear, passenger transport by road, miscellaneous services relating to hairdressing salons and personal grooming establishments/\
Other items where prices were reported high were furniture repair, vehicle spare parts, pharmaceutical products, motor cars, personal transport equipment repair, paramedical services, motorcycle, dental services and bicycles.
The NBS’ report disclosed that food inflation on a year-on-year basis was highest in Edo (24.14 percent), Kogi (23.14 percent) and Sokoto (22.24 percent). On the other hand, it was lowest in Bauchi (16.53 percent), Abia (16.04 percent) and Nasarawa (15.71 percent).
The urban inflation rate rose to 16.33 percent (year-on-year) in December 2020, from 15.47 percent recorded in November 2020, while the rural inflation rate increased by 15.20 percent in December from 14.33 percent in November.
Why Inflation is on the rise
Experts say inflation is on the rise for several reasons. According to Nonso Ihuoma, an economist and finance expert, COVID-19 had dislocated businesses and supply chains, while driving up cost of production.
“It was easier to get input supplies before COVID-19 struck, but it is becoming a bit difficult now due to COVID-19 measures put in place by many countries. If you were getting your raw materials from the UK or the USA, imagine what happens to you now that they are on lockdowns. That situation will either make you seek expensive alternatives or stop production,” he explained.
But this is not the only reason. As of December 2020 which the inflation report reflects, Nigeria’s borders with neighbouring countries were shut, preventing inputs and food from coming into Nigeria. This led to increases in prices of raw materials and food products, thereby driving up inflation rates. The Lagos Chamber of Commerce and Industry (LCCI) and the Manufacturers Association of Nigeria (MAN) noted in 2020 that the border closure shot up prices of inputs and finished products in Nigeria.
Farmers were also hit by floods, leading to lower food production and higher prices.
In its 2021 economic outlook released recently, the LCCI predicted increases in inflation rate this year.
“Looking forward into year 2021, we expect headline inflation to remain elevated as the combination of food supply shocks, foreign exchange (FX) policies, higher energy costs, FX illiquidity, heightened insecurity in major food-producing states, will continue to mount pressure on domestic consumer prices,” Muda Yusuf, director-general of the LCCI, noted.
“We believe a broad-based harmonisation of fiscal and monetary policies towards addressing the identified structural constraints will significantly help to moderate inflationary pressure in the medium term,” Yusuf further said.
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Nigeria has the highest number of poor people in the world, with 87 million living in extreme poverty, according to a report by the World Poverty Clock released in 2018. Six Nigerians jump into extreme poverty every minute, according to the report. The country’s 27 percent population are unemployed, according to the NBS, without hope and support from the government. Increase in inflation rate means that most Nigeria’s poor are struggling to feed themselves and their families.
Ede Dafinone, chairman of the Manufacturers Association of Nigeria Export Group (MANEG), told The ICIR that it would be important for Nigeria to trade more with other nations to reduce poverty and inflation. But doing that, according to him, would mean that the country must support manufacturers, especially exporters.
This, according to him, would bring in foreign exchange badly needed at the moment and enable firms to create more jobs.
His argument was predicated on the fact that inflation in Nigeria was partly imported while high unemployment rate was down to the fact that firms were not operating optimally due to structural challenges in the economy.