Why inflation rose from 11.98% in Dec 2019 to 12.13% in Jan 2020 – NBS
The growth in Nigeria’s domestic savings rate could drop due to its spiraling inflation, analysts have said.
The nation’s inflation rate is currently sitting at 21.91 per cent as against 21.82 per cent recorded in January 2023, indicating a 0.09 per cent increase month-on-month (m/m). This comes amidst uncertainties facing Nigerians due to the scarcity of the redesigned naira notes, the nation’s inflation rate rose in January after recording a fall in December.
According to the National Bureau of Statistics (NBS), the increases were recorded in all Individual Consumption by Purpose (COICOP) divisions that yielded the headline index.
However, on a year-on-year basis, the headline inflation rate was 6.22 per cent points higher compared to the rate recorded in January 2022, which was 15.60 per cent.
“This shows that the headline inflation rate (year-on-year basis) increased in January 2023 when compared to the same month in the preceding year (i.e., January 2022),” it said.
The NBS also noted that the contributions of items on a class basis to the increase in the headline index are bread and cereal (21.67 per cent), actual and imputed rent (7.74 per cent), potatoes, yam and tuber (6.06 per cent), vegetables (5.44 per cent), and meat (4.78 per cent).
In its report titled; “The Cost of Nigeria’s Spiraling Inflation Rate on the Average Household”, Afrinvest said that the average inflation rate reading recorded has resulted to the share of final consumption expenditure of households in the inflation-adjusted national disposable income reduce mildly to 71.3 per cent in 2022 from 75.2 per cent in Q2 2021, due largely to the estimated sharp increase of 250.1 per cent in the share of final consumption expenditure of the general government to N7.3 trillion over the period.
The research based company said that despite the estimated modest decline in the share of final consumption expenditure of households in disposable income in 2022, it is evident that compared to 2019, the average household have raised the share of disposable income allocation to final consumption expenditure by more than 10.0 ppts in each of the last two years just to sustain consumption and living standard.
The report said, “As such, we conclude that Nigeria’s spiraling inflation rate would continue to hurt the growth in the domestic savings rate, and by extension investment capacity of the average household and the economy at large due to declining purchasing power. Final consumption expenditure on critical non-food items such as education and health by the average household may further decline in the years ahead if the inflation scourge persists.”
Hence, this may result in a decline in productivity per capita in the medium to long-term. Given that prices are usually sticky downward, a modest upward review in the minimum wage rate combined with a concerted effort targeted at boosting output level in the near term (to curb demand-pull inflation) and taming supply-side shocks would be key to preventing more households from falling below the poverty line”.