NIGERIA’S headline inflation worsened to 25.80 per cent in August, mirroring the slowdown in business activities due to rising input costs and sustained leaps in food and transport costs.
According to the National Bureau of Statistics (NBS) latest Consumer Price Index (August 2023) report released on Friday, September 15, the headline inflation rose on a month-on-month (m/m) basis from 24.08 per cent in July.
When compared on a year-on-year y/y) basis, inflation was higher than the 20.52 per cent rate recorded in August 2022.
The food inflation rate also rose to 3.87 per cent points on a m/m basis in August compared to the 3.45 per cent rate in July.
According to the Statistics Office, the rise in food inflation from July to August was caused by increased prices of bread and cereals, potatoes, yam and other tubers, fish, oil and fat, coffee, tea, and cocoa.
On a y/y basis, the food inflation increased to 29.34 per cent, higher than the 23.12 in August 2022.
Core inflation likewise rose to 2.18 per cent in August, higher than 2.11 per cent in July and, on a y/y basis, surged to 21.15 per cent compared to 17.12 per cent in August 2022.
“Before July, ‘all items less farm produces’ is called the core inflation. This was because the prices of items that constitute energy were regulated by the government, e.g., petroleum motor spirit (PMS).
“Due to the deregulation of the sector and the removal of the fuel subsidy, all the items that constitute energy are now determined by market forces, and hence their prices are termed volatiles. Therefore, core inflation is referred to as all items index less farm produces and energy,” NBS stated.
Meanwhile, business activity dropped in August on rising input costs but just a little margin above the contractionary threshold.
According to the latest monthly Purchasing Managers’ Index (PMI) report by Stanbic IBTC Bank, the headline PMI dropped to 50.2 in August from 51.7 in July, the lowest in five months.
This means marked inflationary pressures remained a major hindrance to businesses in August.
A PMI reading above 50 indicates that business activity is expanding, while below 50 indicates means contracting.
The PMI measures the performance of the private sector in agriculture, manufacturing, services, construction and retail.
“Nigerian private sector business activity slowed further in August, reflecting strengthening price pressures which in turn diminished consumer demand.
“Both overall input costs and staff costs increased at the largest pace since the survey began,” the head of equity research (West Africa) at Stanbic IBTC bank, Muyiwa Oni, said.
The inflationary pressure again reflects higher transportation costs due to the fuel subsidy removal and exchange rate devaluation.
It has resulted in rising transportation costs, which has caused supplier delivery delays, and companies increased their selling prices at a record pace, with the rate of inflation surpassing the previous peak from December 2021, Oni stated in the report.
Nigeria’s real gross domestic product (GDP) growth rose to 2.51 per cent year-on-year in the second quarter (Q2) from 2.31 in the first quarter (Q1) of this year.
The performance, however, undershot the 3.54 per cent recorded in Q2 of 2022.
The slower growth in Q2 of this year reflects the slowdown in consumer spending and economic activities due to the combined impact of petrol subsidy removal and, to some extent, exchange-rate devaluation; analysts widely agreed.
“The knee-jerk reaction to the over 200 per cent increase in petrol prices impelled a slowdown in transportation across the country; the transportation sub-sector contracted by 50.6 per cent y/y.
“Road transportation contracted by 55 per cent y/y. Price pressures are likely to keep growth subdued. We, however, see the non-oil sector supporting growth into December,” the Stanbic IBTC head of equity research said.
