In fact, some households borrow, while others beg to feed as rising prices of essentials and declining incomes take a toll on survival. Food inflation accelerated to 22.95 per cent, the highest since the current Consumer Price Index (CPI) base year (2009), in March. But the National Bureau of Statistics (NBS), which has the responsibility to declare the official inflation rate, said prices started decelerating in April.
According to NBS, food inflation slowed down further to 21.83 per cent in June, from May’s 22.28 per cent year-on-year rise, while headline inflation also came down to 17.75 per cent, from its three-year high of 18.17 per cent in March.The data said the headline inflation increased by 1.06 per cent month-on-month in June, as against 1.01 per cent recorded the preceding month.
Last week, the Federal Reserve Chair, Jerome Powell, explained that the Americans might have to tolerate faster inflation in the coming months, suggesting that the problem is transitory as earlier thought.
Europe and other regions are currently fighting resurging inflation triggered by the expanded fiscal programmes rolled out to combat COVID-19 economic challenges. This supports the position of those who believe it is a temporary phenomenon.
But Nigeria’s inflationary pressure predated COVID-19 and it is often linked to foreign exchange crisis and insecurity.
Hence, Chief Consultant, B. Adedipe Associates Limited, Dr. Abiodun Adedipe, said Nigeria’s rising price challenge is unique and worrisome. The economist said the consistent depreciation of the Naira is disastrous for the country, which depends on importation for survival.
The value of Nigeria’s import ballooned in recent years, hitting N6.85 trillion in Quarter 1. That amounted to about 70.2 per cent of the total N9.76 trillion of the total foreign trade. Since the fourth quarter of 2019, the country’s external trade position has been in deficit; and quarter by quarter, the deficit had expanded.
The Lagos Chamber of Commerce and Industry (LCCI), yesterday, urged the government to focus on reducing the cost of energy, logistics, and other variables to moderate the effect of inflation on Nigerians.
Dr Muda Yusuf, outgoing Director-General of LCCI, said three principal drivers of inflation included cost-push factor, supply chain disruptions, and monetisation of fiscal deficit or inflation tax.
As average Nigerians balk at the credibility of the NBS data, Yusuf listed high energy costs, which included the spike in the cost of diesel, electricity, and aviation fuel, high transportation and cost of logistics, and high import tariff as major cost-push factor influencers.
“Headline inflation of 17.75 per cent is still a reflection of intense and persistent inflationary pressure on the Nigerian economy. Even more worrisome is the incessant high food inflation, which was 21.83 per cent in June.
“High inflation hurts investment, it is injurious to the welfare of the people and detrimental to the economy. The main factors that have disrupted output in the economy are also heightened insecurity,exclusion of some critical industries from the official foreign exchange window, trade policy issues, among others,” he said.
To ease inflationary pressure, Yusuf called for the reduction of energy and logistic costs, reviewing import tariffs on selected production inputs, improving productivity across all sectors, addressing insecurity, addressing the ports crisis, stemming exchange rate depreciation, and controlling the government’s reliance on the Central Bank of Nigeria (CBN) for deficit finance to comply with the CBN act.
He urged the Central Bank of Nigeria (CBN) to reduce its financing of fiscal deficit to levels provided for in the CBN Act, saying fiscal deficit financing by the Apex Bank acted as a major inflation driver.
“The infusion of this financing typically increases money supply and aggravates inflation. It is high-powered money and also characterised as inflation tax. Reports of interest payments of over N480 billion on Ways and Means financing by the apex bank between January and May 2021 is quite instructive,” he said.