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Nigeria's Inflation Rate Now Above 12 Per Cent
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Nigeria’s Inflation Rate Now Above 12 Per Cent

Nigeria’s National Bureau of Statistics (NBS) on Tuesday said that the nation’s Consumer Price Index (CPI), which measures inflation rate, rose to 12.13 percent in January 2020, its highest in almost two years.

The index increased from the 11.98 per cent rate recorded in December 2019.

The inflation rate has been rising for the fifth straight month, hitting its highest level since April 2018. This also marks the first time since April 2018 that inflation was above 12 per cent.

The inflation kike is traceable to the closure of Nigeria’s land borders with its neighbours, Benin Republic, Niger, Chad and Cameroon in August 2019 largely to stop the smuggling of rice and other goods.

But the closure, which is still in force and has driven up prices of staple foods and inflation. According to the NBS inflation rate report, “the consumer price index, (CPI) which measures inflation increased by 12.13 per cent (year-on-year) in January 2020. This is 0.15 percentage points higher than the rate recorded in December 2019 (11.98 per cent).

“On a month-on-month basis, the headline index increased by 0.87 per cent in January 2020, this is 0.02 per cent rate higher than the rate recorded in December 2019 (0.85 per cent).”

Details of the report show that urban inflation rate rose to 12.78 per cent from 12.62 per cent in December 2019, while the rural inflation rate increased by 11.54 per cent in January from 11.41 per cent in December 2019.

The report added that “the composite food index rose by 14.85 per cent in January 2020 compared to 14.67 per cent in December 2019. This rise in the food index was caused by increases in prices of bread and cereals, meat, oils and fats, potatoes, yam and other tubers and fish.

“In January 2020, food inflation on a year on year basis was highest in Sokoto (19.08 per cent), Ogun (18.72 per cent) and Nasarawa (17.07 per cent), while Bayelsa (12.91 per cent), Delta (11.57 per cent) and Benue (11.33 per cent) recorded the slowest rise.”

On month on month basis, 2020 food inflation was highest in Ondo (2.95 per cent), Anambra (2.61 per cent) and Abuja (2.57 per cent), while Benue, Kogi and River recorded price deflation (general decrease in the general price level of food or a negative food inflation rate).

According to Lukman Otunuga of FXTM, “the rising inflationary pressures could not have come at a worst possible time for Nigeria. The country is currently grappling with lower oil prices and fears over the coronavirus’s impact on the global economy.

“The growing threat of inflation building momentum amid the ongoing border closer may force the Central Bank of Nigeria (CBN) to deploy unconventional monetary policy tools to support the Nigerian economy. Given how the International Monetary Fund (IMF) has revised its 2020 growth forecast for Nigeria to 2 per cent, from the 2.5 per cent predicted earlier, the CBN may need to act fast.

“While rate cut could stimulate consumption, it may end up quickening inflation which is detrimental for the Nigerian economy. On the other hand, an interest rate hike could contain inflation but this will be at the expense of consumer spending and business investment.”

In January, the CBN left interest rates unchanged at 13.5 per cent. However, the cash reserve ratio was raised to 27.5 per cent, from 22.5 per cent for the first time in four years in an effort to boost liquidity in the banking system.

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