Despite contracting aggregate demand, falling purchasing power and other indicators that highlight reduced consumption and sluggish business activities, Nigeria’s headline inflation rate has reached 21.91 per cent, a height not seen in past decades.
Owing to an increase in the cost of food and fuel, February’s consumer price index posted a month-on-month (m/m) change of 1.71 per cent, a slower climb when compared with the 1.87 per cent recorded in January.
The slowdown in the m/m change suggests the intensity is weakening. Economists often use month-on-month changes in price to assess the current momentum of inflation. Unlike year-on-year (y/y) change, the m/m rate isolates the trend from remote base effects.
Headline inflation rose to 21.91 per cent in February amid a naira redesign policy that was meant to mop up cash and curb excess currency in circulation.
According to the Organised Private Sector in the country, the Central Bank of Nigeria’s naira redesign policy has contributed to a naira crisis that has driven inflation to record high.
It is alarming that Nigeria’s 21.91 per cent inflation rate for February 2023 is the highest in 18 years.
Data from the National Bureau of Statistics revealed that this is the second consecutive month inflation is rising in the year after it fell in December 2022, after an 11-month rise. In January, inflation rose to 21.82 per cent from the 21.34 per cent that was recorded in December 2022.
The NBS, on Wednesday, disclosed that increases in the price of bread, cereal, rent, potatoes, yam, tubers, vegetables, and meat drove inflation up in February.
It said, “In February 2023, the headline inflation rate rose to 21.91 per cent compared to January 2023 head-line inflation rate which was 21.82 per cent.
“Looking at the trend, the February 2023 inflation rate showed an increase of 0.09 per cent points when compared to January 2023 headline inflation rate.”
The national statistics body of the country added, “The contributions of items on a class basis to the increase in the headline index are presented, thus: bread and cereal (21.67 per cent), actual and imputed rent (7.74 per cent), potatoes, yam and other tubers (6.06 per cent), vegetable (5.44 per cent), and meat (4.78 per cent).”
The effect of the February inflation was more felt in Bauchi State (24.59 per cent), Rivers State (24.40 per cent), and Ondo State (24.27 per cent), where inflation is above the national average.
Sokoto State (18.90 per cent), Borno State (18.94 per cent), and Cross River State (19.62 per cent), recorded the slowest rise in headline y-o-y inflation.
In February, food inflation rose to 24.35 per cent year-on-year. Food was more expensive in Kwara State as food inflation hit 29.51 per cent, Imo State (27.47 per cent), and Lagos State (27.42 per cent). It was lowest in Sokoto State (18.54 per cent), Jigawa State (19.67 per cent), and Yobe State (21.89 per cent).
“We are worried that there would be more troubles ahead if there is no stability in the system before the next planting season gets underway, because farmers and farm workers conduct their businesses in cas”
It is not in doubt that the CBN naira redesign policy which has fueled scarcity of the local currency was responsible for the spike in the country’s inflation rate because the policy was not consistent with what is obtainable in the marketplace.
Normally, Nigeria’s real inflation rate should not be less than 50 per cent if properly calculated.
It is because of the strain in the economy caused by this badly implemented cashless policy.
The current inflation surge can be traced to the current increase in the prices of goods.
The food inflation expanded by three base points to 24.35 per cent year-on-year following the cash crunch policy and dry-season effect as Nigerians search for cash to purchase scarce staple foods (like meat, tubers, and vegetables) from farmers.
The correlation between naira scarcity and the recent inflation prints could be counterproductive and hurt the economy badly, if not properly managed.
We are worried that there would be more troubles ahead if there is no stability in the system before the next planting season gets underway, because farmers and farm workers conduct their businesses in cash.
It is not enough for the CBN to release a terse statement saying old notes are back in circulation. The apex bank should go ahead and issue the necessary directives to the banks to get Nigerians to trust in the banking system again.
It is also uncertain if the Federal Government is still interested in providing leadership to stimulate economic growth because it appears as if the current government is disinterested in the happenings in the country now.
President Muhammadu Buhari seems to have begun his countdown to May 29, 2023. The naira redesign is a bad policy. The effects are not showing yet as it will take a few months for the government and the people to know the damage it has done to the economy.
Without economic stability to enable people to produce, inflation will continue to go up. Government should put in place the necessary infrastructure like power and good roads.
The government also needs to address the issue of insecurity and the energy crisis. The fuel queues are still with us and that is adding to the cost of transportation across the country.
The restriction on cash holding will worsen the situation, as it has restrained production and other economic activities, which would invariably trigger another round of price crisis.
We equally charge the Federal Government to focus on the supply side challenges around energy costs, foreign exchange crisis and insecurity to bring the inflation rate back to normal.
Nigeria should be able to produce energy locally and give room to private companies that are interested in building oil refineries.
We should not only depend on the Nigerian National Petroleum Company Limited because if we can produce fuels locally, the prices will come down and be affordable.
