The annual inflation rate in Nigeria rose for the 10th consecutive month to 21.47 per cent in November, recording the highest mark in 17 years, from 21.09 per cent in October driven by yuletide induced increase in demand for goods and services, persistent depreciation of the Naira and rise in cost of production. As a result the annual inflation rate has risen by 5.87 percentage points in 10 months from 15.6 per cent in February. National Bureau of Statistics, NBS, said this in its Consumer Price Index, CPI report for November. The NBS in the report said “in November 2022, on a year–on- year basis, the headline inflation rate was 21.47 per cent. This was 6.07 per cent points higher compared to the rate recorded in November 2021, which was 15.40 per cent. This means that in the month of November 2022, the general price level was 6.07 per cent higher relative to November 2021.
“On a month-on-month basis, the Headline inflation rate in November 2022 was 1.39 per cent, this was 0.15 per cent higher than the rate recorded in October 2022 (1.24%). This means that in the month of November 2022, the general price level was 0.15 per cent higher relative to October 2022. The percentage change in the average CPI for the twelve months period ending November 2022 over the average of the CPI for the previous twelve months period was 18.37%, showing a 1.39% increase compared to 16.98% recorded in November 2021. The Increases were recorded in all COICOP divisions that yielded the Headline index.”
Commenting on the November inflation rate Director Centre for the Promotion of Private Enterprise CPPE, Dr. Muda Yusuf said “over the last one year, the Nigeria inflation story has been a depressing one as reflected in the dynamics of all key price metrics. The key inflation drivers have not changed over the last few years.
They include the following: the depreciating exchange rate, rising transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, climate change, insecurity ravaging farming communities and structural constraints to economic activities. Fiscal deficit financing by the CBN is also a significant factor fuelling inflation through high liquidity injection into the economy “Tapering of monetary easing in the advanced economies is also driving imported inflation and the depreciation in the exchange rate. Consequences of soaring inflation include the following: erosion of purchasing power of citizens as real incomes collapse; mounting poverty; escalation of production costs which negatively impacts profitability; shrinking shareholder value in many businesses; waning of investors’ confidence and dwindling manufacturing capacity utilisation.
Taming inflation demands urgent government intervention to fix= supply side constraints in the economy. Tackling production and productivity constraints, fixing the dysfunctional forex policy, and reducing liquidity injection through ways and means funding of fiscal deficit. Meanwhile, the CBN should resist the temptation of further monetary policy tightening. The deployment of monetary tightening tools should be put on pause. The Nigerian economy is not a credit driven economy which is why the tightening outcomes has been inconsequential as a tool to tame inflation. As at October 2022, credit to the private sector as a percentage of GDP was 22.7% in Nigeria. The percentages for other countries in 2020 according to world bank were 32% in Kenya; 96% in Morocco; 193% in Japan; 143% in UK; 216% in the United States; and 39% was average for sub-Sahara Africa. This underscores the need for variabilities in policy responses.
Inflation had been spiking despite the serial monetary tightening. Sustained tightening penalises entrepreneurs [especially the real sector], increases cost of credit with heightened prospects of a backlash on growth. Inflation restraining strategies should accordingly focus on productivity boosting supply side factors and reduction in ways and means funding of deficit,
The NBS report said that, “on a year-on-year basis, in the month of November 2022, the urban inflation rate was 22.09 per cent, this was 6.17 per cent higher compared to the 15.92 per cent recorded in November 2021. On a month-on-month basis, the urban inflation rate was 1.50 per cent in November 2022, this was 0.16 per cent higher compared to October 2022 (1.33%). The corresponding twelve-month average for the urban inflation rate was 18.90 per cent in November 2022. This was 1.35% higher compared to the 17.55 per cent reported in November 2021.
“The rural inflation rate in November 2022 was 20.88 per cent on a year-on-year basis; this was 5.99 per cent higher compared to 14.89 per cent recorded in November 2021. On a month-on-month basis, the rural inflation rate in November 2022 was 1.30 per cent, up by 0.14 per cent compared to October 2022 (1.16%). The corresponding twelve-month average for the rural inflation rate in November 2022 was 17.88 per cent. This was 1.46 per cent higher compared to the 16.42 per cent recorded in November 2021.”
