Economic experts explain why inflation has been on the increase for two consecutive months in Nigeria
By Anayo Ezugwu
Flooding and persistent farmers/herdsmen crisis have been blamed for the steady rise in Nigeria’s headline inflation for two consecutive months. According to the Nigerian Bureau of Statistics, NBS, the nation’s Consumer Price Index, CPI, which measures inflation rose by 11.28 percent in September from 11.23 percent recorded in the previous month. Economic analysts fear that inflation rate will continue to rise as a result of general increases in prices of goods and services.
Sheriffdeen Tella, professor of Economics, argued that the flooding and herdsmen attacks had impacted negatively on food production. He also said that Importing raw materials and production equipment into the country contributed to the current high inflation in Nigeria.
“We will need to live with rising inflation for some time until local content of local production improves considerably. Headline inflation has gone up again and the main cause is the food sector. It is expected at the planting season but prices are expected to come down during harvesting,” he said.
On his part, Ambrose Omordion, economic expert, said a rise in inflation was expected, in spite of various loans extended to farmers by the Central Bank of Nigeria, CBN, to boost food production. He said insecurity and killings by herdsmen drove most farmers out of their farms, which resulted to shortages in food supply.
He said that high cost of transportation due to a lack of infrastructure and high cost of funding also contributed to the development. “The rise was little as expected because the impact of the 2018 budget is mild as many approved projects are not backed with cash and political spending is yet to trickle down,” Omordion said.
Godwin Emefiele, governor, CBN, had attributed the increase in headline inflation to shortage of food supply. “The rise in headline inflation was from food, while core inflation declined, indicating that supply side factors were driving the price increase.
“The near-term upside risks to inflation remained the dissipation of the base effect, expected 2019 election-related spending, continued herdsmen attack on farmers and the current episodes of flooding which has destroyed crops and will affect food supply and prices,” he said.
To address this challenge, Emefiele urged the fiscal authorities to ensure sustained implementation of the 2018 budget to relieve the supply side growth constraints, as well as address the flooding incidence in the country.
On his part, Ike Chioke, financial expert, urged the federal government to take urgent measures towards reforming key sectors of the Nigerian economy to sustain the growth momentum and avert imminent downturn. He stated that there is an opportunity to reset the dynamics of the economy and build new growth levers that would propel Nigeria on the path of progress in 2019.
According to him, while there are some positive signs of growth in the economy, certain key vulnerabilities have been identified as drawbacks to the nation’s growth potential. “There is need for fiscal, monetary, and structural reforms to sustain growth and avert a sharp downturn. The next oil shock is inevitable given volatile commodity prices. We are not saving for rainy day,” he said.
Chioke said the federal government should ensure the passage of the Petroleum Industry Bill, PIB, and fully liberalise the downstream sector of the petroleum industry to attract more investors.
According to the NBS, this is the second consecutive month of inflation rise after 18 consecutive months of decline. The report stated that on a month-on-month basis, the headline index increased by 0.84 percent in September 2018, down by 0.21 percent points from the rate recorded in August 2018 (1.05) percent.
“The urban inflation rate increased by 11.70 percent (year-on-year) in September 2018 from 11.67 percent recorded in August 2018, while the rural inflation rate increased by 10.92 percent in September 2018, from 10.84 percent in August 2018. On a month-on-month basis, the urban index rose by 0.86 percent in September 2018, down by 0.14 from 1.00 percent recorded in August, while the rural index also rose by 0.82 percent in September 2018, down by 0.14 percent from the rate recorded in August 2018 (0.96) percent. The composite food index rose by 13.31 percent in September 2018 compared to 13.16 percent in August 2018.”
– Oct. 19, 2018 @ 20:35 GMT |