2015: High political financing may worsen Nigeria’s inflation

The high level of political financing in the run up to the 2015 election campaigns may worsen the inflation trend in the country, the Lead Director, Centre for Social Justice, CENSOJ, Eze Onyekpere, has said.

Mr. Onyekpere was reacting on Monday to the latest Composite Price Index, CPI, published on Sunday by the National Bureau of Statistics, NBS.

The CPI, which measures the general price level for a period, showed that the rate of inflation for October dropped about 0.2 percentage points from about 8.3 per cent in September to about 8.1 per cent.

The NBS said the rate in October was the second time inflation would ease marginally after it consistently climbed for most part of the year.

According to the statistics bureau, the weakened pace of price increases recorded in the headline inflation index in the month was as a result of slower increases in food prices, including other major Classification of Individual Consumption by Purpose (COICOP).

The Food index, the Bureau said, rose by 9.3 per cent in the month, on a year-on-year basis, down by 0.4 per cent recorded in September.

“The ease in the increase in food prices for the second consecutive month was as a result of slower increases in all groups that contributed to the index,” the NBS said.

The Bureau reported further that price movements recorded by the All Items-less-Farm Product, or Core sub-index, moved at the same pace for the third consecutive month at 6.3 per cent (year-on-year), holding for the lowest rate increases recorded in the year so far.

The bureau noted that muted price increases were also recorded across most divisions and groups that yield the core index, including Catering Services, fuels and lubricants for personal transport, and non-durable household goods.

On a month-on-month basis, the NBS said headline price index rose by 0.51 per cent in October, marginally lower from the 0.55 per cent in the preceding month.

“On year-on-year basis, the pace of increase of both Urban and Rural prices eased for the second consecutive month in October. The Urban Composite CPI rose by 8.1 percent, down from 8.4 per cent in September, while the Rural Composite CPI rose by 8.0 per cent down from 8.4 per cent in the previous month.

“Urban prices have increased at the same pace for the previous three consecutive months: by 0.5 per cent while the pace of increases in the Rural All- items index eased, increasing by 0.5 per cent, down from 0.6 per cent in September,” the bureau said.

“The percentage change in the average composite CPI for the 12-month period ending in October over the average of the CPI for the previous 12-month period was recorded at 8.0 per cent, unchanged from rates recorded in September, while corresponding Rural index was also unchanged in October increasing by 7.9 per cent,” it added.

The pace of increase in food prices, the Bureau said, rose by 9.3 per cent, representing the lowest price increase since March this year.

The NBS, however, reported that the pace of increases in the “All Items Less Farm Produce” or Core index, which excludes the prices of volatile agricultural products, held firm for the third consecutive month in October, rising by 6.3 per cent year-on-year.

But Mr. Onyekpere, said the level of inflation in the economy, which has remained for over a year due to the pressure on the Naira and the economy, was as a result of declining crude oil prices at the international oil market in recent times.

As an oil-dependent economy, Mr. Eze said the pressures would continue if the price of oil would continue to decline, adding that though the situation may be okay at the moment, the elections might heighten it.

“The situation now is okay. It could be better. But, by the time politicians begin to spend their huge campaign funds, which would not reflect on the production of goods and services in the economy, it would likely affect the level of inflation in the country,” he said.

According to him, the high level of political financing would definitely spike the level of inflation in the country in the near future.

But the CEO Global Analytics Consulting Limited, Tope Fasua, said for inflation to be going down at a time people would expect to rise as a result of political campaigns showed that the Nigerian economy has the capacity to defy conventional economic theories.

According to Mr. Fasua, the argument that increased spending during elections would raise inflation towards election was contestable, considering that the amount of money that would get to the average man in the streets would be insignificant to impact on his purchasing power.

Rather, he said the pressure would be much on the country’s foreign exchange end of things, in view of the fact that politicians would ultimately take the money outside the country, apart from the pressure on the economy as a result of the decline in crude oil prices at the international market.

He urged Nigerians to try to think outside the box and find out why this was happening, as the opinions of most Nigerians may not have been sought by the NBS before computing the new inflation figures.

“I don’t belief personally that the small tokens of N5 the politicians would be giving out during elections would be enough to impact on the level of inflation in any significant way,” Mr. Fasua said.