Nigerian inflation hit a four-year peak in February as food prices jumped more than 20 percent, heaping financial pressure on households already faced with a shrinking labour market and a stagnant economy at a time of mounting insecurity.
Inflation, in double digits since 2016, reached 17.33 percent, driven by the impact of a coronavirus epidemic that has also induced a drop in the price of oil, Nigeria’s main export, and weakened the naira currency.
OUR TIMES reports that the National Bureau of Statistics (NBS) said the inflation rate increased in February by 0.86 percent to 17.33 percent, from 16.47 percent in January.
The NBS said this in its Consumer Price Index (CPI) report for February 2021 released on Tuesday in Abuja.
The Bureau said that CPI increased by 17.33 percent (year-on-year) in February.
Tuesday’s inflation reading was the highest since the 17.78 percent touched in February 2017. The economy was in a slump then and is teetering on the brink of recession now, having expanded just 0.11 percent in the fourth quarter.
Food prices, which make up the bulk of the inflation basket, rose 21.79 percent in February, a jump of 1.22 percentage point in January, the National Bureau of Statistics (NBS) said.
In a country plagued by insecurity following a wave of kidnappings of schoolchildren in its increasingly lawless north, there are concerns that the “stagflation” combination of rising unemployment and prices and low growth could trigger significant social unrest.
“Straining households will be compounded by increasing reports of insecurity in some regions, fuelling the risk of broader social discontent,” said Jacques Nel, head of macroeconomic research at NKC African Economics in South Africa.
Staples including bread, cereals, potatoes, fruits and oil drove the increase in the food price index, the NBS said in its report.
Inflation pressures would probably remain high in coming months, Nel predicted, adding that just 30.6 million Nigerians in a population of around 210 million were considered fully employed.
Managing director at Lagos-based Financial Derivatives, Bismarck Rewane, said the “stagflation crisis” would take a long time to resolve, with inflation eating up economic gains to the point where any government stimulus might be too weak to generate jobs.
The director-general of Lagos Chamber of Commerce and Industry (LCCI), Miss Yusuf said, “There are many variables impacting domestic prices. These factors include transportation costs logistics challenges, exchange rate depreciation, forex liquidity issues, hike in energy prices, climate change, insecurity in many farming communities and structural bottlenecks to production.”
He stated that these are essentially supply side issues, saying, any mitigation measures would have to be situated in the context of these variables, adding that, the CBN had admitted that the potency of monetary policy instruments in tackling inflation is weak.
Yusuf further said, “Mounting inflationary pressures weakens purchasing power of citizens as real incomes are eroded, it accentuates pressure on production costs, it negatively impacts profitability, and undermines investors confidence.
“It is not in all cases that high production costs can be transferred to consumers. The implication is that producers are also taking a hit. This is more pronounced where the demand for the product is elastic. These are products that consumers can readily do without.
“Tackling inflation requires urgent government intervention to address the challenges bedeviling the supply side of the economy.”
Professor of economics, Sheriffdeen Tella, of Olabisi Onabanjo University, Ago-Iwoye, Ogun State, said the inflationary trend was expected because production in agricultural sector was falling.
Tella said that production in agricultural sector was dropping due to herdsmen and bandits nefarious activities as well as bad weather.
He said that cost of production in industry was rising as a result of hike in electricity tariff, petroleum products and depreciation of naira.
On the way forward, Tella said that government should take decisive action on the herdsmen and bandits activities now that the rainy season is here.
“Secondly, government should subsidise industries through tax relief, putting a stop to price hikes in electricity and fuel.
“They should also encourage consumption by paying salaries as and when due because production without corresponding consumption will discourage producers from production and expansion, which ultimately promote employment,” he said.
Chief operating officer, InvestData Ltd, Mr Ambrose Omordion, said the inflationary pressure in February was largely impacted by higher food prices due to the high cost of transportation, production and insecurity in the north.
Omordion said many farmers were driven from their farmlands as a result of insecurity in the north.
He said that government needed to map out policies that would tackle insecurity in the country to boost confidence.
The pump price of fuel and electricity tariff, according to him, also contributed to the development.
Also, analysts at Cordros Research said that the figure reflected the effects of persistent conflict between farmers and herdsmen, particularly in the Northern region of the country.
They said that lingering impact of supply chain challenges and foreign exchange devaluation on food prices amid the partial reopening of the land borders contributed to the trend.
The report said increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yielded the headline index.
“On month-on-month basis, the headline index increased by 1.54 per cent in February, this is 0.05 per cent rate higher than the rate recorded in January (1.49 per cent),” said the report.