More Nigerians are expected to fall into the poverty pit in 2023 as inflation continues to bite harder on the citizens of Africa’s most populous country. BAMIDELE FAMOOFO writes.
As at November 2022, according to the National Bureau of Statistics, two out of every three Nigerians are poor and experience just over one-quarter of all possible deprivations in terms of health, education, living standards, work and shocks.
The NBS, in its 2022 Multidimensional Poverty Index report, revealed that 133 million (63 percent) Nigerians are suffering from multidimensional poverty, with children constituting more than half of poor people in the country.
The MPI is the result of the 2022 Multidimensional Poverty Index survey carried out by NBS and development partners.
The survey was a collaborative effort between the National Bureau of Statistics, the National Social Safety-Nets Coordinating Office, the United Nations Development Programme, the United Nations Children’s Fund, and the Oxford Poverty and Human Development Initiative.
A breakdown of the dimensions of poverty used for the MPI includes: Nutrition, Food insecurity, Time to healthcare, School attendance, Years of schooling and School lag.
Others are Water, Water reliability, Sanitation, Housing materials, Cooking fuel, Assets, Unemployment, Underemployment, Security shock
Among other things the report showed that 65 percent of poor people, about 86 million, live in the North, while 35 percent, about 47 million, live in the South.
Data released by the NBS on Thursday, last week, showed that inflation increased for a tenth consecutive time in 2022, printing 21.47 percent year on year in November from 21.09 percent in the previous month on the back of rising import costs as a result of Naira depreciation, disruptions in the food supply chain, and the continued rise in the cost of production for companies.
Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, commenting on the implication of the trend on the economy, observed that the persistent rise in inflation is fast eroding the purchasing power of the people (consumers), noting that if the trend persists, the productive base of the economy will continue to be impacted by the spending power of Nigerian consumers in the near future as wages have remained stagnant.
He noted that the performance of the industry as a whole was impacted by spiraling inflation, weakening consumer demand, rising raw material costs, and currency pressures.
“So far, prices have trended upward in 2022 across all categories captured in the CPI basket, especially since the start of the Russian-Ukrainian war. When we consider the weight of the basket, the movement of prices in the food and nonalcoholic beverage sectors has also played an important role. Overall, food inflation has continued to be the principal driver of inflation, including in November”
According to him, “The industry was also under pressure due to a number of long-term issues, such as an epileptic power supply, rising diesel prices, which added to the cost of operations.”
“As agriculture remains constrained due to rising insecurity, there are concerns that the cost of inputs and raw materials will further escalate. Typically, consumers resort to down trading when income is squeezed and this may lead to reduction in volume of goods sold,” Rewane urged.
Also commenting on the inflation data from the NBS, Muda Yusuf, Director, Centre for the Promotion of Private Enterprise, said the phenomenon of mounting inflationary pressures in the Nigerian economy, which has refused to abate, remains a major cause for concern for stakeholders in the Nigerian economy.
Yusuf warned that the ever-rising inflation will erode the purchasing power of citizens as real incomes collapse. Consequently, he said, poverty will increase as rising production costs will also impact negatively on the profitability of the industrial sector of the economy. Shrinking shareholder value in many businesses and waning investors’ confidence as well as dwindling manufacturing capacity utilization are some of the grave consequences the economy will face as inflation persists.
He cautioned that the Central Bank of Nigeria should resist the temptation of further monetary policy tightening; calling for the deployment of monetary tightening to be put on pause.
According to the immediate past Director General of the Lagos Chamber of Commerce and Industry, the tightening outcomes has been inconsequential as a tool to tame inflation because the Nigerian economy is not a credit driven economy.
He substantiated his claim with statistics showing that as at October 2022, credit to the private sector as a percentage of GDP was 22.7 percent in Nigeria.
“The percentages for other countries in 2020 according to the World Bank were 32% in Kenya; 96% in Morocco; 193% in Japan; 143% in UK; 216% in the United States; and 39% was average for sub-Sahara Africa. This underscores the need for variability in policy responses,” he said.
Speaking on the way out, he said: “Sustained tightening penalizes entrepreneurs [especially the real sector], increases cost of credit with heightened prospects of a backlash on growth. Inflation restraining strategies should accordingly focus on productivity boosting supply side factors and reduction in ways and means funding of deficit. Taming inflation demands urgent government intervention to fix supply side constraints in the economy. Tackling production and productivity constraints, fixing the dysfunctional forex policy; and reducing liquidity injection through ways and means of funding the fiscal deficit.”
Analysts’ position
Cowry Research expects prices to remain elevated in 2023 as the lag effects of the current fuel scarcity, the impact of the flooding experienced so far in 2022, low productivity from both oil and the agricultural sector, and the foreign exchange scarcity in the face of Naira depreciation begin to rear their heads in the scheme of things and further drive moderate acceleration in the headline index.
For December, the expectations for a price surge ahead of the festive celebrations in the face of an awaited seasonal boost to food supplies from the post-harvest season coupled with the anticipation of higher spending as the election campaign season enters 2023 are expected to push up prices across the board.
“That said, we project headline inflation at 21.98 percent for December, while the average annual inflation prints 18.82 percent for 2022,” the experts said.
Research Analyst at Cordros Research, Tesleemah Lateef, noted that although inflation outlook still remains elevated when taking into account the recent flooding that affected many food-producing states; the rise in energy costs, which is reflective of the increases in fuel prices (diesel and kerosene), coupled with the depreciating Naira and rising airfare prices; it is expected that the inflation numbers will gradually moderate within the first six months of 2023 following efforts by the apex bank through several monetary policy tools to quell inflation.
She however noted that the battle with inflation in Nigeria has posed a downside to its growth prospects as of late.
“So far, prices have trended upward in 2022 across all categories captured in the CPI basket, especially since the start of the Russian-Ukrainian war. When we consider the weight of the basket, the movement of prices in the food and nonalcoholic beverage sectors has also played an important role. Overall, food inflation has continued to be the principal driver of inflation, including in November,” Lateef said.
Inflation in retrospect
Nigeria’s inflation rose to 21.47 percent in November with the price level increasing by 6.07 percentage points year on year to 21.47 percent. In November 2021, the figure stood at 15.40 percent.
The figure was driven largely by higher cost energy, rising cost of production due to currency depreciation and the rush to spend during the yuletide season.
Data published by the National Bureau of Statistics on Thursday showed that inflation increased by 1.39 percent on a month-on-month basis, 0.15 percent higher than the rate recorded in October 2022 (1.24%).
This means that in the month of November 2022, the general price level was 0.15 percent higher relative to October 2022. The percentage change in the average CPI for the twelve months period ending November 2022 over the average of the CPI for the previous twelve months period was 18.37 percent, showing a 1.39 percent increase compared to 16.98 percent recorded in November 2021.
The statistics bureau hinted that the month on month increase in price of commodities can be attributed to the sharp increase in demand usually experienced during the festive season.
Increase in the cost of importation due to the persistent currency depreciation and general increase in the cost of production fueled mainly by increase in energy cost were major factors responsible for year on year increase in inflation according to NBS.
Both the urban and rural inflation recorded a rise in the review period with the former recording a sharper increase.
On a year-on-year basis, in the month of November 2022, the urban inflation rate was 22.09 percent, this was 6.17 percent higher compared to the 15.92 percent recorded in November 2021. On a month-on-month basis, the urban inflation rate was 1.50 percent in November 2022; this was 0.16 percent higher compared to October 2022 (1.33%).
The corresponding twelve-month average for the urban inflation rate was 18.90 percent in November 2022. This was 1.35 percent higher compared to the 17.55 percent reported in November 2021.
“States with the fastest rise in headline inflation in November 2022 were Ebonyi (26.11%), Kogi (25.84%), and Rivers (24.45%), while Kaduna (18.87%), Sokoto (19.02%), and Cross River (19.17%) recorded the slowest rise in headline year-on-year inflation. For food inflation, Kwara (29.74%), Kogi (29.51%), and Ebonyi (28.25%) led the charts, while Kaduna (19.30%), Sokoto (19.48%), and Jigawa (20.55%) recorded the slowest rise in year-on-year food inflation”
On the flipside, the rural inflation rate in November 2022 was 20.88 percent on a year-on-year basis; this was 5.99 percent higher compared to 14.89 percent recorded in November 2021.
On a month-on-month basis, the rural inflation rate in November 2022 was 1.30 percent, up by 0.14 percent compared to October 2022 (1.16%). The corresponding twelve-month average for the rural inflation rate in November 2022 was 17.88 percent. This was 1.46 percent higher compared to the 16.42 percent recorded in November 2021.
The food inflation rate in November 2022 was 24.13 percent on a year-on-year basis; which was 6.92 percent higher compared to the rate recorded in November 2021 (17.21%).
The rise in food inflation was caused by increases in prices of Bread and cereals, Oil and fat, Potatoes, Yam and other tubers, Food products and Fish. On a month-on-month basis, the food inflation rate in November was 1.40%, this was 0.17 percent higher compared to the rate recorded in October 2022 (1.23%).
This increase was attributed to an increase in prices of some food items like Oil and fat, Fruits, Fish, and Tubers The average annual rate of food inflation for the twelve-month period ending November 2022 over the previous twelve-month average was 20.41 percent, which was 0.21 percent points lower from the average annual rate of change recorded in November 2021 (20.62%).
Inflation by states
Meanwhile, states with the fastest rise in headline inflation in November 2022 were Ebonyi (26.11%), Kogi (25.84%), and Rivers (24.45%), while Kaduna (18.87%), Sokoto (19.02%), and Cross River (19.17%) recorded the slowest rise in headline year-on-year inflation. For food inflation, Kwara (29.74%), Kogi (29.51%), and Ebonyi (28.25%) led the charts, while Kaduna (19.30%), Sokoto (19.48%), and Jigawa (20.55%) recorded the slowest rise in year-on-year food inflation.
