Nigeria’s inflation story took a contentious twist yesterday as the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), releases its own statistic contradicting that of the National Bureau of Statistics, NBS, by a significant margin.
The headline inflation rate increased by 0.24 percentage points to 34.19 percent in June from 33.95 percent in May, according to the NBS’s Consumer Price Index (CPI) for June 2024. However, Kelvin Oye, the president of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), declined to respond when Vanguard asked him for an explanation, stating only that “inflation is over 90 percent.”
NBS, providing its own details, stated that among other food items, the price of millet whole grain, garri, guinea corn, etc. (bread and cereals class), yam, wateryam, cocoyam, potatoes, yam & other tubers class, and other items increased, causing food inflation to rise to 40.87 percent in June 2024 from 40.66 percent in May 2024.
Financial analysts, meanwhile, reported that the NBS’s numbers exceeded both the individual and consensus projections.
According to NBS, “the headline inflation rate increased to 34.19 percent in June 2024 compared to 33.95 percent in May 2024.”
“Looking at the movement, the June 2024 headline inflation rate showed an increase of 0.24 percentage points when compared to the May 2024 headline inflation rate.
“On a year-on-year basis, the headline inflation rate was 11.4 percentage points higher compared to the rate recorded in June 2023, which was 22.79 percent.
“This shows that the headline inflation rate (year-on-year basis) increased in the month of June 2024 when compared to the same month in the preceding year (i.e. June 2023).
“The rise in Food inflation on a year-on-year basis was caused by increases in prices of the following items: Millet Whole grain, Garri, Guinea corn, etc (Bread and Cereals Class), Yam, Water Yam, Coco Yam (Potatoes, Yam & Other Tubers Class), Groundnut Oil, Palm Oil, etc (Oil & Fats Class) and Catfish Dried, Dried Fish-Sadine, Mudfish (Fish Class), etc.
According to NBS, the highest rates of food inflation in June on an annual basis were found in Edo (47.34 percent), Kogi (46.37 percent), and Cross River (45.28 percent). The lowest rates of food inflation on an annual basis were found in Nasarawa (34.31 percent), Bauchi (34.78 percent), and Adamawa (35.96 percent).
David Adonri, an analyst and executive vice chairman at Highcap Securities Limited, responded by saying, “The inflation rate is still rising despite all of the CBN’s measures.” The persistent inflation that this type of inflation is causing is not being addressed by continued monetary policy application; rather, supply side fiscal policy rather than demand management is needed.
“Should the monetary authority react by hiking interest rate again, it will further increase yield on debt and cause financial assets to migrate more to debt. This may harm ongoing recapitalization exercise of banks. Rising inflation is not good news for equities.”
“Looking ahead, food inflation, the main driver, is expected to taper off because of the short-term federal government’s recent interventions,” Comercio Partners analysts said in response to the inflation’s recent rise. “Abubakar Kyari, the minister for Agriculture and Food Security, announced a N2 trillion package to curb rising prices and speed up stabilization and growth.
“Also, a 150-day duty-free import window has been approved, allowing tariff-free importation of maize, husked brown rice, wheat, and cowpeas through land and sea borders. This measure, with imported commodities subject to a Recommended Retail Price (RRP), aims to provide immediate relief.
“However, tackling food inflation long-term means addressing underlying issues like transportation and logistics challenges, harvest losses, and regional insecurity. Moreover, discussions around raising the minimum wage could further fuel inflationary pressures.
“On the monetary front, recent interest rate hikes have helped combat inflation, but another hike seems unlikely because of tight macroeconomic environment.
“However, a focus should shift towards addressing the root causes of inflation without stifling economic growth.”
“The June CPI data indicated that inflation soared by 24 basis points (bps) to 34.2% YoY, missing experts’ average consensus of 33.94% and our prediction of 33.90%,” CardinalStone Finance analysts said in their comments.A stronger food inflation eclipsed our milder inflation forecast, which was predicated on the stability of the foreign currency (FX) market.
“We perceive that the food basket is still grappling with an uptick in input costs and persisting insecurities in the review period, thus propping up prices.
“The outlook for July’s inflation is likely to be mixed on the back of multiple factors. On upside risk, we expect the recent PMS scarcity and another electricity tariff hike for ‘Band A’ users to increase price pressure.
“Furthermore, FX volatility will likely be prevalent in July, stemming from increased FX demand for vacation and payment of foreign tuition fees.
“While these highlighted factors are expected to increase inflationary risk, we anticipate the base effect to sufficiently moderate YoY inflation.
“Moreover, the government’s decision to suspend duties, tariffs, and taxes on the importation of certain commodities like Maize, husked brown rice, Wheat, and cowpeas for the next 150 days is expected to lead to lower food prices. “The government’s plan to import 250,000MT of Wheat and 250,000MT of Maize also bodes well for the food price outlook, providing a positive counterbalance to the inflationary risks. “Overall, we expect headline inflation to moderate by 50bps to 33.7%.
“In light of the above, we expect the monetary policy authority to maintain its hawkish stance and hike the policy rate by 50 to 100bps in its July meeting”
Clifford Egbomeade, a public policy analyst and communication specialist, made the following statement in his own response: “The economy will be significantly impacted by Nigeria’s inflation rate rising to 34.19% in June 2024. First, it lowers customers’ purchasing power, raising the cost of products and services and lowering living standards, especially for low- and middle-class households. This rising cost of living has the potential to worsen financial hardship and cause a rise in the number of impoverished individuals.
“High inflation also creates economic uncertainty, which can deter both local and foreign investment. Investors are likely to be cautious in such an environment, leading to reduced investment and slower economic growth. “Moreover, the Central Bank of Nigeria (CBN) may be compelled to further raise interest rates to control inflation, which increases borrowing costs for businesses and consumers, potentially further slowing down economic activities.
“To address rising inflation, the government and the CBN should consider a combination of monetary and fiscal measures. Tightening monetary policy can help curb excessive money supply, although this must be done carefully to avoid stifling economic growth. Implementing prudent fiscal policies, such as reducing fiscal deficits and improving tax collection, is also crucial. Investing in supply-side interventions, such as supporting local production and reducing import dependency, can help stabilize prices in the long run”.
