UPDATED: Nigeria’s Inflation hits 32-month peak

Nigeria’s headline inflation rose to 15.75 per cent in December, its highest level in 32 months, the National Bureau of Statistics said on Friday.

The figure is an indication that President Muhammadu Buhari’s order in December reopening the country’s land borders to trade has not immediately succeeded in arresting galloping in food prices.

Inflation touched 14.89 per cent in November, with the 0.86 per cent month-on-month increase in December figure marking the 16th consecutive month inflation would increase in Nigeria.

That will complicate recovery efforts for Africa’s largest economy, which slipped into its second recession in four years and the worst in nearly forty years in the third quarter of 2020, after recording two contractions in a row.

It will also heap further pressure on cost of living and disposable income, while weakening consumer spending.

“Rising Inflation rate is a serious consumer pressure point, and reduces consumer purchasing power over time,” Samuel Bamidele, a Lagos-based financial research analyst told PREMIUM TIMES.

“Inflation rate at 15.75% in December 2020 is obviously not good for the economy, and particularly in an economy characterised by single-digit interest rate on investment,” he added.

Inflationary pressures have never abated since the Buhari administration announced a shutdown of Nigeria’s porous land borders with all neighbours in October 2019 in a move seeking to spur mass production of food as well as curb smuggling and associated corruption.

This alongside banditry attacks on farms and deluge of rain submerging paddy fields in northern Nigeria, a region largely known for low rainfall, has been accelerating food costs.

“The reopening of land borders is expected to ease food inflation rate, however, the impact on prices may not happen immediately, perhaps in the next 3-6 months before any possible impact will suffice.

“If food inflation responds quickly to the opening borders, then we may start witnessing some easing,” Mr Bamidele said.

According to the statistics office, the composite food index jumped 19.56 per cent in December, relative to the 18.30 per cent of the preceding month.

“This rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats,” the NBS added.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, said this week government planned to keep inflation at 11.95 per cent by year end, following the Central Bank of Nigeria (CBN)’s inability to keep it within a single-digit target range of between 6 to 9 per cent for more than four years.

The December figure surpassed the forecast of market intelligence firm Financial Derivatives, which projected a 15.4 per cent inflation rate for December.

“The continued rise in the general price level is driven largely by forex rationing, output and productivity constraints, higher logistics and distribution costs,” Financial Derivatives said in a note.

“In December 2020, all items inflation on year on year basis was highest in Bauchi (19.85%), Edo (18.15%) and Kogi (18.40%), while Lagos (14.05%), Kwara (13.91%) and Abia (13.30%) recorded the slowest rise in headline year on year inflation,” the NBS said.

Earlier this month, electricity tariffs in Nigeria soared by 50 per cent, following the introduction of a new Multi Year Tariff Order, an action, which together with increasing fuel pump prices, was bound to push cost of living up higher. But a backlash from the populace forced government to halt enforcement.

Power Minister Sale Mamman said government would now hold talks with labour to carve a middle path by January end.

“On headline inflation, the Central Bank may raise MPR perhaps in Q2 2020 just to mop up some excess liquidity in the system, and this is also expected to have the inflation down trending impact,” Mr Bamidele said.

The latest figures will form part of deliberations at the next CBN monetary policy committee meeting due next week.