The hike in food prices and other individual consumption across the country further increased the rate of inflation in Nigeria to 14.23 per cent in October.
Figures released by the National Bureau of Statistics on Monday showed that the country’s inflation increased again in October, moving up by 0.52 per cent when compared to what was recorded in the preceding month.
This came as analysts stated that the continued closure of Nigeria’s borders and the persistent hike in petrol price, among others, further worsened the rate of inflation in Nigeria.
The NBS said, “The Consumer Price Index, which measures inflation increased by 14.23 per cent (year-on-year) in October 2020.
“This is 0.52 per cent points higher than the rate recorded in September 2020 (13.71 per cent).”
It was observed that increases were recorded in all Classification of Individual Consumption by Purpose divisions that yielded the headline index.
On a month-on-month basis, the headline index increased by 1.54 per cent in October, representing 0.06 per cent rate higher than the rate recorded in September (1.48 per cent).
The percentage change in the average composite CPI for the 12-month period ending October over the average of the CPI for the previous 12-month period was 12.66 per cent.
This showed a 0.22 per cent point rise from 12.44 per cent recorded in September.
The urban inflation rate increased by 14.81 per cent (year-on-year) in October from 14.31 per cent recorded in September.
Rural inflation rate, on the other hand, increased by 13.68 per cent in October from 13.14 per cent in September.
On a month-on-month basis, the urban index rose by 1.6 per cent in October, up by 0.04 from 1.56 per cent recorded in September.
The rural index also rose by 1.48 per cent in October 2020, up by 0.08 from the rate recorded in September (1.40 per cent).
The corresponding 12-month year-on-year average percentage change for the urban index was 13.29 per cent in October.
This was higher than 13.07 per cent reported in September, while the corresponding rural inflation rate in October was 12.09 per cent compared to 11.86 per cent recorded in September.
A professor of political economy and management expert, Pat Utomi, said Nigeria was in need of investments to rejig economic activities.
He said, “Typically, what you do to bring down inflation, from the monetary policy point of view, is to reduce the money supply to the economy. However, we desperately need investments to resume economic activity.
“Already, there is very little money reaching the investor. The investment to jumpstart growth is not taking place. “To make money expensive by hiking the interest rate (which is a natural response to inflation) will make matters worse. This is because it will discourage investment and we will get a really awkward situation.
“The Nigerian economy will not grow until we have banks sensitive to development. For too long, banks have been profitable from lending to three or four people in the economy.
“The banking industry has not supported real growth in the economy. Now, we have a situation where the supply chain has made products unavailable, pushing costs and therefore we have inflationary pressures.”
Utomi said that the challenge of the moment was to ensure that whatever credit available goes to the productive sector and to crash the cost of governance.
He called for stimulus responses and more investments to create growth, saying Nigeria might go on the path of Venezuela.
The President of the Association of Capital Market Academics of Nigeria, Prof. Uche Uwaleke, stated that the rise in inflation was caused by many factors.
Uwaleke said, “With the effect of COVID-19 on the economy still lingering, especially from supply chain disruptions, it is no surprise that headline inflation has continued to rise.
“This is with the NBS October number coming in at 14.23 per cent up from 13.71 per cent the previous month.
“Contributory factors include the continuous border closure, the increase in VAT and implementation of stamp duty.
“The high exchange rate, especially in the parallel market, and the increase in the pump price of fuel also contributed because, according to the NBS, a major cause of core inflation came from increase in transport cost.”
Uwaleke further noted that the rise in food inflation was worrisome, adding that this was despite the interventions of the Central Bank of Nigeria.
“Consequently, government should focus on increasing food production by aggressively implementing the massive agricultural programme contained in the Economic Sustainability Plan,” he said.
Also speaking on the latest inflation rate, a former President, Association of National Accountants of Nigeria, Dr. Sam Nzekwe, stated that Nigeria had remained a consuming rather than a producing nation.
An economist with Lagos Business School, Bongo Adi, said inflation would get worse and predicted that it was heading towards 20 per cent.
He stated that apart from food inflation, government borrowing was pushing up inflation indices.
“Inflation will get worse because it is not about food inflation; there is also pressure coming from core inflation and headline inflation because as government continues to borrow – as that borrowing spree continues, we will see higher level of inflation,” he said.
Adi noted that the economic disruption caused by the coronavirus pandemic had not subsided but had been worsened by the recent #EndSARS protest across the country.
According to him, farmers are unable to get their produce to the market during the period of disruption and their farm produce got damaged.
“The only direction inflation can go now is upwards; 14 per cent is still manageable and from what I have seen, it is nudging towards 20 per cent,” the economist added.
The Director-General, Nigeria Employers’ Consultative Association, Mr Timothy Olawale, expressed concern over the rising inflation rate in the past 10 months.
He said the rise indicated that the policy of the Central Bank of Nigeria in taming inflation needed critical review.
He noted that the persistent increase in food prices, caused by border closures, restrictions in the forex market, rising cost of transportation and insecurity predominantly in the Northern states had further heightened the situation.
“Since the deregulation of petrol prices, the country has witnessed petrol increase by almost 30 per cent in the last four months, which suggests a continuous increase in transport cost. Sadly, Nigerians are now being battered on two fronts: high transport cost and high inflation,” Olawale said.
To mitigate these challenges, NECA DG advised the Federal Government to roll out more direct fiscal interventions to aid domestic production as was done in the agricultural sector.
According to him, the interventions should be extended to the mining, manufacturing and other high job creating sectors.
He called for concerted efforts in order to create an environment that would not only attract foreign direct investment but also enable current investors to remain sustainable.
The DG, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, also noted that there were many variables impacting domestic prices.
Some of them, according to him, are transportation costs, logistics challenges, cargo clearing problems, exchange rate depreciation, forex liquidity issues, VAT increase, climate change, insecurity in many farming communities and structural bottlenecks to production.
He said any mitigation measures would have to be situated in the context of the key inflation drivers.