*Highest in three years
Inflation rate in Nigeria rose to 11.4 per cent in February from 9.6per cent in January. This represents the highest inflation rate in three years since December 2012. The National Bureau of Statistics (NBS) disclosed this in its inflation report for February.
The Bureau attributed the rise in inflation to increase in prices of food items as well as prices of imported items. The NBS report states, “In February, the Consumer Price Index (CPI) which measures inflation recorded a significant uptick. The headline index increased by 11.4% (year-on-year) in February, roughly 1.76% points higher from rates recorded in January (9.6%). The faster pace of increases which led to the overall increase in the headline index were recorded across almost all major divisions which contribute to the Headline index with the exception of the Restaurants and Hotels division which increased, albeit at a slower pace.
After increasing at the same pace for two months, the pace of increases of food prices as recorded by the Food sub-index increased at faster pace in February. The Food index increased by 11.3%, up by 0.71% points from rates recorded in January. During the month, all major food groups which contribute to the Food sub-index increased at a faster pace during the month with the exception of the Potatoes, Yams and Other Tubers; and Sugar, jam, honey, chocolate and confectionery groups.
The “All Items less Farm Produce” or Core sub-index, increased at a faster pace in February as imported items as well as other domestic shocks resulted in ripple effects across many divisions that contribute to the Core. The index increased by 11.0% in February, roughly 2.2% points from rates recorded in January.
“On a month-on-month basis, the Headline Index increased at a faster pace in February relative to January. The index increased by 2.3%, in February, roughly 1.4% points from
rates recorded in January, as all divisions that contribute to the index increased with the exception of the Restaurants and Hotels division increasing at a slower pace. The 11.4 percent inflation rate reported by NBS for February exceeds the 10.1 percent predicted by the Financial Derivatives Company last week. The Company said, “We are projecting the year-on-year (YoY) headline inflation rate for February 2016 to spike to 10.1 percent.
“Though the factors driving inflation are unchanged, the impact of exchange rate pressures on inflation was accentuated by fear and speculation. Income effect is bearing more significance than cost pressure because a depreciating naira erodes consumer disposable income. In order to compensate for lost income, producers and retailers are increasing prices of goods. The resulting effect is that consumers run to substitutes, thereby increasing demand and prices for these substitutes.
“During the first half of the month, when the naira was trading at N307 per dollar, headline inflation is estimated to have spiked to 9.8 percent. This increase was spurred mainly by traditional cost-push factors.
“In the second half when the dollar scarcity panic set in, traders and manufacturers increased prices arbitrarily. Under the guise of naira weakness, even items without import content were repriced. Consumers are now resisting further increases and we see prices decreasing in the near term.”
