Inflation maintains upward slope, hits 24.08% in July
…Food inflation up by 26.98% YoY in July 2023
…How flooding, high cost of transportation hiked food prices — Analyst explains
…Tackling inflation requires urgent government intervention — CCPE
By Seun Ibiyemi and Matthew Denis
For the seventh month in a row, Nigeria’s headline inflation has risen eminently to 24.08 per cent in July 2023.
The National Bureau of Statistics (NBS) disclosed this in its Consumer Price Index (CPI) and Inflation Report for July, which was released in Abuja on Tuesday.
According to the report, the figure is 1.29 per cent points higher compared to the 22.79 per cent recorded in June.
It said on a year-on-year basis, the headline inflation rate in July was 4.44 per cent higher than the rate recorded in July 2022 at 19.64 per cent.
It added, “This shows that the headline inflation rate (year-on-year basis) increased in July 2023 when compared to the same period in July 2022.”
The report said that the contributions of items on the divisional level to the increase in the headline index were food and non-alcoholic beverages at 12.47 per cent and housing, water, electricity, gas and other fuel at 4.03 per cent.
Others were clothing and footwear at 1.84 per cent; transport at 1.57 per cent; furnishings, household equipment and maintenance at 1.21 per cent and education at 0.97 per cent, and health at 0.72 per cent.
The report said, “Miscellaneous goods and services at 0.40 per cent; restaurant and hotels at 0.29 per cent; alcoholic beverage, tobacco and kola nut at 0.26 per cent; recreation and culture at 0.17 per cent, and communication at 0.16 per cent.”
In addition, the report said , on a month-on-month basis, the headline inflation rate in July 2023 was 2.89 per cent, which was 0.76 per cent higher than the rate recorded in June 2023 at 2.13 per cent.
The report explained that this means that in July 2023, on average, the general price level was 0.76 per cent higher relative to June 2023.
It said the percentage change in the average CPI for the 12 months ending July 2023 over the average of the CPI for the previous 12 months period was 21.92 per cent.
The report added, “This indicates a 5.17 per cent increase compared to 16.75 per cent recorded in July 2022.”
…Food inflation up by 26.98% YoY in July 2023
Food inflation rate in July was 26.98 per cent on a year-on-year basis, which was 4.97 per cent higher compared to the rate recorded in July 2022 at 22. 02 per cent.
The food subindex increased by 3.45% MoM, up by 1.06 per cent from the rate of 2.40 per cent recorded in June 2023. The 12-month average rate rose to 24.46 per cent, 0.42 per cent higher than 24.03% recorded in the preceding month. General increase in the demand for food items with specific increases in prices ofBread and cereals, Potatoes, Yam and other tubers, Fish, Oil, and Fat significantly exacerbated food inflation.
“The rise in food inflation on a month-on-month basis was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, fish, oil, and fat,” the report by NBS stated.
The report said the highest increases were recorded in prices of passenger transport by air and road, gas, vehicles spare parts, medical services, maintenance, and repair of personal transport, among others.
Meanwhile, Core inflation, which currently depicts all Items Less Farm Produces and Energy, increased to 2.11 per cent MoM, up by 0.34 per cent from 1.77 per cent recorded in the prior month. Meanwhile, The 12-month average rate rose to 18.84 per cent in the month under review, 0.37 per cent higher than 18.71 per cent recorded in June 2023. The highest increases were recorded in prices of Passenger Transport by Air, Passenger Transport by Road, Vehicle Spare Parts, Medical Services, Maintenance, and repair of personal transport equipment etc.
Furthermore, on a year-on-year basis in July, the urban inflation rate was 25.83 per cent, which was 5.74 per cent higher compared to the 20.09 per cent recorded in July 2022.
“On a month-on-month basis, the urban inflation rate was 3.05 per cent in July representing a 0.75 per cent rise compared to June 2023 at 2.31 per cent,” The report disclosed.
On states’ profile analysis, the report showed in July, all items inflation rate on a year-on-year basis was highest in Kogi at 28.45 per cent, followed by Lagos at 27.30 per cent, and Ondo at 26.83 per cent.
It, however, said the slowest rise in headline inflation on a year-on-year basis was recorded in Borno at 20.71 per cent, followed by Jigawa at 20.85 per cent, and Sokoto at 20.92 per cent.
The report, however, said in July 2023, all items inflation rate on a month-on-month basis was highest in Kogi at 4.99 per cent, Abia at 4.12 per cent, and Akwa Ibom at 4.07 per cent.
It added, “Jigawa at 0.16 per cent, followed by Taraba at 1.09 per cent and Yobe at 1.10 per cent recorded the slowest rise in month-on-month inflation.”
The report said food inflation in June, on a year-on-year basis, was highest in Kogi at 34.53 per cent, followed by Lagos at 32.52 per cent, and Bayelsa at 31.31 per cent.
It added, “Jigawa at 20.90 per cent, followed by Sokoto at 21.63 per cent and Kebbi at 22.45 per cent recorded the slowest rise in food inflation on a year-on-year basis.’’
The report, however, said on a month-on-month basis, in July, food inflation was highest in Kogi at 6.73 per cent, followed by Akwa Ibom at 5.64 per cent and Bayelsa at 4.59 per cent.
It said: “With Taraba at -0.21per cent, followed by Jigawa at 0.28 per cent and Yobe at 0.90 per cent recorded the slowest rise on month-on-month food inflation.’’
…How flooding, high cost of transportation hiked food prices — Analyst explains
An analyst with Commercio Partners Group has attributed flooding and high cost of transportation as part of the factors resulting in the hike of food prices.
In a macro research report, the analyst noted that, “Despite the anticipated operations of local refineries and the President’s 500,000 hectares farmland plan, our inflation expectations for the ensuing months remain dreary.”
Continuing, the analyst added that, “factors like further flood fears in Southern Nigeria, speculative price hikes in pump prices, continued depreciation of the Naira and sustained dependency on imports impact expectations.”
The analyst attributed the persistent increase in food prices to ineffective measures to mitigate the ongoing insecurity and displacement issues in the North.
“The Northern Green Harvest with its anticipated food distribution, also already hindered by high transportation costs, faced other impediments like floodings due to the ongoing rainy season.
“Meanwhile, imported food costs continue to accelerate with FX rates at N788/$ at the I&E FX window – now Nigerian Foreign Exchange Market (NFEM), and N870/$ in the Parallel Market as of July 2023. Likewise, Core inflation continues to play its hand in the uptick of headline inflation.
“The 2nd increase in pump prices to N568/ltr was unanticipated. Further tightening the necks of citizens still adjusting to the initial price hike. Symmetrically, fuel consumption declined to 46.3 millionlitresper day for July 2023, against 66.6 millionlitresper day in May 2023 prior to the subsidy removal. This translates to lower demand for fuel, depicting reduced movement of individuals and food items,” the report read.
…Tackling inflation requires urgent government intervention — CCPE
In a swift response to the increase in inflation, the Director General, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said that “the surging inflation has had a devastating effect on citizens welfare and the health of small businesses.
“Headline inflation accelerated to 24.08 per cent in July as against 22.79 in June. Food inflation maintained its upward trajectory, accelerating to 27 per cent. Evidently, we are yet to see an abatement to the key factors fueling inflation.
“The inflationary pressures have intensified. Some of these factors are global, others are domestic.
“These factors include the depreciating exchange rate, spike in energy prices, rising transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, insecurity in many farming communities and structural bottlenecks impeding productivity.
“These are largely supply side and policy concerns. But the petrol price increase following the fuel subsidy removal and the sharp depreciation in the exchange rate were dominant factors.
“Mounting inflationary pressures have the following consequences for the economy: Weakening of purchasing power of citizens as real incomes are eroded thus aggravating poverty incidence, Escalating production costs which negatively impacts profitability Erosion of shareholder value in many businesses, Weakening of investors’ confidence, Declines in manufacturing capacity utilization as a consequence of weakening sales and erosion of profit margins.
“Tackling inflation requires urgent government intervention to address the challenges bedeviling the supply side of the economy. It is imperative to urgently fix production and productivity constraints, stabilize the exchange rate by ensuring liquidity in the forex market, tackle insecurity, accelerate efforts to ensure domestic refining of petroleum products and fast-tracking tax and fiscal reforms to curb escalating deficit spending.
“To give producers and citizens some relief, the government should tweak the tariff policies by granting concessionary import duty on intermediate products for industrialists, especially those in the food processing segments of the agriculture value chain,” he said.
Also reacting to the rise in inflation, the Executive Director of Nigerian Workforce Strategy and Enlightenment Centre (NIWOSEC), Dr David Kayode Ehindero stressed that monetary policy are unstable in the country thereby affecting the release by National Bureau Statistics (NBS) noting key players in the economy are watching the direction of the government.
He explained that the CBN has been hiking interest rates to battle inflation, which keeps rising, meaning that the monetary policy tool has failed.
“The effects of foreign exchange depreciation are hard felt as Naira continues to weaken, as an import-dependent country. So, whenever the domestic currency falls relative to the dollar, this inevitably raises the prices of imported things, which does not help the food inflation situation.”
According to him, the northern states where most of the country’s farmlands are located are taken over by insecurity activities such as terrorism and kidnapping, stopping farmers from going to farms and deepening the food shortage.
Dr. Ehindero emphasised that the Federal government should as matter of urgency address the insecurity challenges so that farmers can have access to their farmlands so as to produce more foodstuff for the market as it will naturally reduce costs.
He maintained that households in a low-income country such as Nigeria are particularly exposed to changes in the price of staple cereals, with diets concentrated on just one type of grain. Adding that the proposed palliatives by government cannot cushion the effect of suffering.
Dr. Ehindero stressed that the inflation rate which has risen to 24.08 per cent in July 2023 will continue to increase because the forex trading is rising too.
