NIGERIA’S January (2021) inflation rate peaked at 16.47 percent, from 15.75 percent reported in December 2020, data on the Consumer Price Index (CPI) released by the National Bureau of Statistics (NBS) on Tuesday shows.
This is the highest inflation rate recorded in 34 months and a big signal that poverty rate is deepening in Africa’s most populous nation.
Africa’s largest economy is currently grappling with its economic crisis as it is going through the second recession in four years.
The Consumer Price Index (CPI), which measures inflation, increased by 0.72 percent from 15.75 percent recorded in December 2020.
The CPI measures price changes over a period of time.
As Nigeria currently wrestles with insecurity and the global pandemic, major activities driving food production and consumption have been disrupted.
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The killings of civilians and farmers by herdsmen, abduction, cult clashes and communal conflicts are some of the insecurities threatening food production and charging inflation in the country, with farming, proper preservation and transportation of food items heavily affected, experts say.
All Item Index
According to the report by NBS, the headline index increased by 1.49 percent (month-on-month) in January 2021. This represents a 0.12 decrease from the 1.61 percent recorded in December 2020 (1.61 percent).
Urban and rural inflation rates also increased to 17.03 percent and 15.92 percent in January 2021, from 16.33 percent and 15.20 percent recorded in December 2020, respectively.
For the 12-month year-on-year average percentage change, the corresponding urban index was 14.23 percent in January 2021. This percentage is higher than the 13.86 percent reported in December 2020, while the corresponding rural inflation rate in January 2021 was 13.04 percent compared with the 12.67 percent recorded in December 2020.
The composite food index rose by 20.57 percent in January 2021, compared with 19.56 percent in December 202. The ‘Food and non-alcoholic beverages’ was responsible for this rise.
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In January 2021, Kogi State recorded the highest food inflation (26.64 percent), followed by Oyo (23.69 percent) and Rivers (23.49 percent), while Ondo (17.20 percent), Abuja (16.73 percent), and Bauchi (16.37 percent) recorded the lowest rates.
However, on a monthly basis, food inflation was the highest in Oyo (4.47 percent), Lagos (3.86 percent), and Rivers (3.11 percent), while Akwa Ibom (0.25 percent) and Bayelsa (0.13 percent) recorded the lowest rises, with Edo reporting price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).
The high inflation rate for Oyo State in January could also be attributed to the herdsmen crisis and communal clashes in January.
In addition to the insecurity currently faced, The ICIR had reported the 2020 economic review and outlook for 2021 by the Lago State Chamber of Commerce and Industry (LCCI) which predicted that poverty, inflation, and debt might increase in Nigeria due to the COVID-19 pandemic resurgence and poor economic fundamentals.
The Manufacturers Association of Nigeria(MAN) said rising inflation would crimp the revival or growth of the industrial sector.
“As you are aware, the manufacturing sector has been struggling, particularly in the past 4 quarters due to the combined effect of COVID-19, deteriorating infrastructure, high regulatory compliance cost and tax obligations,” said Segun Ajayi-Kadir, director-general of MAN, in a statement sent to The ICIR on Tuesday.
He said rising and high inflation, perennially high interest rates and scarce/high rate of foreign exchange had compounded the challenges facing the sector, stressing that they eroded the purchasing power of consumers, crippling their capacity to buy locally manufactured goods.
“The increase in the headline inflation from 15.75 to 16.47 percent is a threat to the envisaged recovery and the growth of the industrial sector. There is also the rise in food inflation which will compound the high cost of living and the disposable income of the average Nigerian. The resulting weak consumer spending will worsen the the high stock of unplanned inventory that the manufacturing sector in confronted with,” he explained.
He said MAN was duly armed with economic recovery recommendations that relevant government authorities could implement to speedily revive the economy from its current state.
He said, for instance, government could intensify efforts at stabilising the consumer price level through growth in agricultural output and diversification of the Nigerian economy in order to guarantee stable prices in both agricultural and manufactured goods.
“Also, there are quite a number of moribund industries in the country that should be resuscitated to boost output and thereby reduce prices,” Ajayi-Kadir recommended.
“Government should also partner with the Manufacturers Association of Nigeria to accelerate the success in the resource-based Industrialisation initiative of the Association,” he further said, stressing that there was a strong relationship between manufacturing sector growth and inflation rate, just like exchange and interest rates.
“Therefore, for this moment and in the immediate future, government should assist manufacturing productivity with credit at competitive rates. This could be in the form of concessions and enhancing existing special credit windows or creating additional ones for this important sector of Nigerian economy,” he noted.
He said deliberate policies to stimulate domestic production and increase domestic and foreign demands for goods would, in the long run, lower inflation and enhance exchange rate appreciations.
Nigeria is world’s poverty capital,
with almost 45 percent of the population in extreme poverty, according to the Brookings Institute. Inflation raises poverty by eroding the purchaing power of consumers, pricing out the poor members of the society, economists say.