Economic recovery: Inflation rate slows by 0.37% – NBS

…rate decline remains minor — former DG LCCI

By Uthman Salami, Ariemu Ogaga & Moses Adeniyi

The Nigerian inflation rate slowed in downward trend by 0.37 per cent for the fifth consecutive time in a row that the rate will be trended downward since March this year.

This is indicated from the recently released Consumer Price Index (CPI) which measures inflation rate fell to 17.01 per cent in August, the National Bureau of Statistics (NBS) said on Wednesday.

According to the latest CPI report from NBS, this rate is 0.37 percent points lower than the 17.38 per cent recorded in July this year.

Inflation dropped from 18.17 per cent in March to 18.12 per cent in April before dropping further to 17.93 per cent, 17.75 per cent and 17.38 per cent in the months of May, June and July respectively.

The NBS said that on a month-on-month basis, the Headline index increased by 1.02 percent in August 2021, adding that this is 0.09 percent rate higher than the 0.93 per cent recorded in July 2021.

The report stated, “The consumer price index, which measures inflation increased by 17.01 percent (year-on-year) in August 2021.

“This is 0.37 percent points lower than the rate recorded in July 2021 (17.38) percent.

“The percentage change in the average composite CPI for the twelve months period ending August 2021 over the average of the CPI for the previous twelve months period was 16.60 percent, showing 0.30 percent point from 16.30 percent recorded in July 2021.”

According to the NBS, the urban inflation rate increased by 17.59 per cent (year-on-year) in August 2021 from the 18.01 per cent recorded in July 2021, while the rural inflation rate also rose by 16.43 per cent in August 2021 from 16.75 per cent in July 2021.

On a month-on-month basis, it said that the urban index rose by 1.06 per cent in August 2021, representing 0.08 percent increase over the rate recorded in July 2021, while the rural index also rose by 0.99 per cent in August 2021.

“The corresponding twelve-month year-on-year average percentage change for the urban index is 17.19 percent in August 2021.

“This is higher than 16.89 percent reported in July 2021, while the corresponding rural inflation rate in August 2021 is 16.03 percent compared to 15.73 percent recorded in July 2021,” the Report added.

For the composite food index, it said this rose by 20.30 percent in August 2021 compared to 21.03 percent in July 2021.

The rise in the food index, it noted, was caused by increases in prices of bread and cereals, milk, cheese and egg, oils and fats, potatoes, yam and other tubers, food products, meat and coffee, tea and cocoa.

On a month-on-month basis, it said the food sub-index increased by 1.06 per cent in August 2021, up by 0.20 percent points from the 0.86 percent recorded in July 2021.

Meanwhile, an Economist and former Director General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf said the National Bureau of Statistics (NBS) August headline inflation figure indicating 0.37% per cent reduction to 17.01% per cent is marginal.

In a chat with Nigerian NewsDirect, he noted that the recent figure calls for the question of materiality.

He urged the Central Bank of Nigeria (CBN) to cut down on its fiscal deficit financing as heightened inflation rate remedy.

“The marginal decline in the August headline inflation by 0.37% to 17.01percent (year on year) is noteworthy. Equally noteworthy is the consistency of the composite price index over the past four months.

“But these declines remain very marginal and raises the question of materiality.

“Headline inflation at over 17 percent is still quite high and remains a cause for concern.  The major inflation drivers have not abated.

“These factors include transportation costs, logistics challenges,  exchange rate depreciation, forex liquidity issues, hike in energy prices, climate change,  insecurity in many farming communities and structural bottlenecks to production. These are basically supply side issues. Any mitigation measures would have to be situated in the context of these factors.

“The heightened fiscal deficit financing by the CBN could be another potent inflation driver. The financing of fiscal deficit has been elevated to disturbing levels with huge implications for money supply and consequent effect on inflation. CBN financing of deficit is high powered money and therefore very inflationary.

“Mounting inflationary pressures weakens purchasing power of citizens as real incomes are eroded, it aggravates pressure on production costs, negatively impacts profitability, erodes shareholders value and undermines investors confidence.

“In many cases, increases in production costs cannot be transferred to consumers. The implication is that producers are also taking a hit. This is more pronounced where the demand for the product is elastic. These are products that consumers can readily do without.

“Tackling inflation requires urgent government intervention to address the challenges bedevelling the supply side of the economy and the moderation of fiscal deficit monetization,” he stated.