Inflation rate in the country crossed the 20per cent mark in August as prices of goods and services continue to soar. The latest inflation rate just released by the National Bureau of Statistics (NBS) rose to 20.52 per cent from 19.64 per cent which it was in July 2022.
Food inflation rose to its highest level since October 2005 when it was 24.56 per cent, increasing by 110bps to 23.12 per cent from 22.02 per cent which it was in July.
Notably, the rise in food inflation was caused by increased prices of Bread and cereals, Food products, Potatoes, yams and other tubers, fish, meat, oil and fat. On a month-on-month basis, food inflation settled at 1.98 per cent, relative to the 2.04 per cent month on month recorded in the previous month.
The inflation report also showed that the highest increases were recorded in prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, fuel and lubricants for personal transport equipment, Cleaning, Repair and Hire of clothing.
The Consumer Price Index just released by the NBS showed that the August year–on- year headline inflation rate at 20.52 per cent was 3.52 percentage points higher compared to the rate recorded in August 2021, which was 17.01 per cent.
This shows that the headline inflation rate increased in the month of August 2022 when compared to the same month in the preceding year, meaning that in August 2022, the general price level was 3.52 per cent higher relative to August 2021.
The percentage change in the average CPI for the twelve months period ending August 2022 over the average of the CPI for the previous twelve months period was 17.07 per cent, showing a 0.47 per cent increase compared to 16.6 per cent recorded in August 2021.
Core inflation, which excludes the prices of volatile agricultural produce stood at 17.20 per cent in August 2022 on a year-on-year basis; up by 3.79 per cent when compared to 13.41 per cent recorded in August 2021.
On a month-on-month basis, the core inflation rate was 1.59 per cent in August 2022. This was down by 0.17 per cent when compared to 1.75 per cent recorded in July 2022.
Commenting, the CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the heightened inflationary pressures in the Nigerian economy remains very troubling with headline inflation surging to 20.52 per cent in August, saying even more worrisome is the spike in food inflation to 23.12 per cent.
“However, on a month-on-month basis, there was a marginal drop in Headline inflation by 0.05 per cent. The reality is that the major inflation drivers have not abated, if anything, some have become even more intense,” he said.
According to Yusuf, these factors include high transportation costs, increasing logistics challenges, worsening exchange rate depreciation, forex liquidity issues, hike in energy prices, climate change issues, insecurity in many farming communities and structural bottlenecks to production.
These are basically supply-side issues.
“The accelerated fiscal deficit financing by the Central Bank of Nigeria (CBN) is also a significant inflation driver. The financing of fiscal deficit has been elevated to disturbing levels at almost N20 trillion. This has huge implications for money supply and knock on effect on inflation. CBN financing of deficit is high powered money and very inflationary. It is inflation tax.
“Mounting inflationary pressures weakens purchasing power of citizens as real incomes are eroded, it aggravates pressure on production costs, negatively impacts profitability, erodes shareholders value and undermines investors’ confidence.”
He added that “in most cases, increases in production costs cannot be transferred to consumers by industrialists. The implication is that producers are also taking a major hit. This is more pronounced where the demand for the product is elastic. These are products that consumers can readily do without.”
Tackling inflation, he said that it requires urgent government intervention to address the challenges bedeviling the supply side of the economy and the moderation of fiscal deficit monetisation.