Economic experts have described as troubling the latest inflation rate for the month of September as announced by the National Bureau of Statistics on Tuesday.
Reacting to the report, Director/Chief Executive Officer of Centre for the Promotion of Private Enterprise, Muda Yusuf, said the reported hike in inflation rate despite policy measures to tame inflation, especially on the monetary side is worrisome.
He noted that purchasing power had continued to plunge over the past few months, stressing that the situation had been further exacerbated by the surging petrol price.
Analysing the NBS inflation report for September, he said, “After a few months of deceleration, the inflation numbers had returned to a spiraling path. Headline inflation rose to 32.7% in September 2024 as against 32.15% in August 2024, an increase of 0.55%. There was also a marginal increase of 0.30% in month-on-month inflation between August and September.
“Food inflation maintained its uptrend rising to 37.77% from 37.52% after decelerating in few months ago.”
He stated that, “The reality is that the dynamics driving inflation are yet to be effectively subdued.”
These factors, he said include the depreciating exchange rate, surging fuel price, rising transportation costs, logistics and supply chain challenges, high energy cost, climate change including resultant incidents of flooding, insecurity in farming communities and structural bottlenecks to production.
“These are largely supply-side issues. There is also the factor of seasonality of agricultural outputs which activates seasonal price surge in some food crops. Elevated inflationary pressures escalate production costs, weakens profitability, and dampens investors’ confidence.”
According to him, “Not many investors can transfer cost increases to their consumers. The implication is that manufacturers and other investors are taking a big hit resulting from erosion of profit margins as a result of consumer resistance and weak purchasing power.”
While calling on the government to do the needful, he said, “Tackling inflation requires urgent government intervention to address the challenges inhibiting production, productivity and security in the economy. The real sector of the economy needs to be incentivized to reduce production costs.
“The government needs to offer concessionary import duty on intermediate products for industrialists. The effects of high energy cost and exchange rate on inflation is quite significant.
“It will be very difficult to tame inflation if we do not substantially fix power, logistics and forex and security issues. Regrettably, there are no quick fixes in these areas. But it is important to prioritize these issues and drive accelerated progress with the right strategies. Hopefully the proposed economic stabilization measures embodied in a bill currently before the national assembly would substantially address these concerns from the fiscal side.”
Speaking to the role state government must play in overcoming the challenges, he said, “Meanwhile, the sub nationals have critical roles to play in mitigating the challenge of food insecurity and food inflation. They are closer to the stakeholders in the agricultural and food value chain and better placed to impact agricultural productivity. The provision of rural roads by the states is also very critical to reduce transportation costs and ease access to markets.”
Also reacting, the Chief Economist/ Partner at SPM Professional, Paul Alaje, attributed the soaring inflation on defective policy initiatives by the government.
“The recently released September 2024 Headline Inflation increased to 32.7% from 32.15% in August 2024.
“The obvious truth is that the policy direction is not right for the type of economy our country has.
“I believe that we need to review our some of our economic policies urgently.
“International organizations were saying as of yesterday that these painful policies may not yield tangible results for the next 10 to 15 years, even though they supported the policy. How amusing. I remember an IMF chief once said in 2016 that our economy was strong and would not enter a recession, but of course, we opposed this assertion and maintained that the economic outlook was weak and would certainly enter a recession on WE FM 106.5 in 2016. The rest is history; Nigeria’s economy did not only contract but also entered a recession in the year 2016 as we projected.
“Regarding the current economic situation, we may not come out of this quagmire anytime soon if the floatation policy is still in place, and if we don’t change the economic direction to be manufacturing-oriented. For those who may wish to know, I have previously mentioned several ways forward. Please take some time to read my previous tweets.
“My other recommendations would be to block leakages, stop oil theft, encourage investment in oil and gas, recover funds and revenues from mineral resources, boost power and energy supply, cut the cost of governance, and many more.
“Whether the released numbers agree with this position or not, time will tell. Without an end to the floatation policy, poverty, hunger, and deprivation may not end soon,” he stated.
On their part, financial researchers at Cordros Securities say they expect headline inflation to rise further in the October report to be posted by NBS next month.
Expressing their opinion in a report titled, “Outlook: Headline Inflation to Rise Further in October,” they noted that, “While the main harvest season is expected to support food supplies, we highlight that the flooding incidents recorded in mid-September are likely to cap gains, limiting the impact on food prices.
“According to FEWSNET, over 342,000 hectares of cropland were estimated to be flooded across the country, particularly affecting food-producing states. Specifically, severe flooding occurred in Bauchi, Jigawa, and Borno States.
“In Yobe State, 11 out of 17 Local Government Areas (LGAs) were isolated due to bridge collapses, disrupting food distribution to markets. We anticipate these challenges will undermine food access in the short term, keeping food prices elevated. Additionally, we expect the persistent currency weakness to keep prices of imported food items high.
“Accordingly, we forecast food inflation to print 2.37% m/m, significantly higher than the 2019-2023 October m/m average (1.47%), pushing the y/y inflation higher to 38.39% (September: 37.77% y/y).
“Elsewhere, we expect the core inflation basket to remain pressured in the near term, driven by already existing factors stoking non-food prices, including (1) rising PMS and gas prices, (2) currency depreciation, (3) higher transportation costs, and (4) increased electricity tariffs.
“As a result, we estimate core inflation to increase to 2.23% m/m, pushing the y/y rate higher to 27.49% (September: 26.36% y/y).
“Overall, we forecast the headline inflation to settle at 2.34% m/m in October, leading to an increase in the y/y print to 33.49% (September: 32.70% y/y).”
