The nation’s annual inflation rate has risen to 14.23 percent in October 2020 from its previous rate placed at 13.71 percent. It has recorded the highest inflation rate since February 2018. There have been several contributory factors which include a high level of increase in prices as a result of border closures, the COVID-19 crisis, the ravaging flood that has swept away crop produce, the recent dollar restriction, amongst others.
The Consumer Price Index (CPI), a metric for measuring the average consumption prices of goods and services overtime, has shown a 0.52 percentage rise. The headline inflation rate has been below 14% prior to the October rise with the major trigger caused by the food crisis in the market.
Food prices increased to 17.38 percent which was previously at 16.66 percent in September. Closely followed by health with 13.08 percent, previously at 12.58 percent; transport 12.11 percent, previously at 11.65 percent; clothing and footwear at 11.25 percent, previously at 11.02 percent; alcoholic beverages, tobacco & kola at 10.79 percent previously at 10.59 percent and furnishings at 10.67 percent previously at 10.43 percent.
The instability of the inflation rate depicts signs of a struggling economy with the constant fluctuation in prices. The Nigerian economy has more than half of its GDP generated by the service sector while the country’s major source of revenue comes from oil.
The reality could be widespread as obvious indications predict that Nigeria’s inflation rate may rise to 20 percent by December, due to the high demand for food and other commodities ahead of the coming festive season. Operators forecast a 100 percent rise in the next three months if measures are not put in place to check the major cause of the increase in inflation.
Dr Muda Yusuf, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), disclosed that the CBN have conceded that the monetary policy instruments used to tackle inflation is weak:
‘Mounting inflationary pressures weaken the purchasing power of citizens as real incomes are eroded, it accentuates pressure on production costs, negatively impacts profitability, and undermines investor confidence.’
The economy may continue to contend with the devastating effects of the pandemic for the rest of the year. The Central Bank has emphasized on the necessity for merging broad-based monetary and fiscal policy measures in order to put a restraint on the rise in inflation and decrease in output growth.
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The masses are presently saddled with the high cost of transportation and high inflation. Demands have been placed on the Federal Government to bring about direct fiscal intervention to assist with domestic production, similar to what was done in the agricultural sector. There should be a robust investment in the mining, manufacturing and other high-job creating sectors to diversify production. It would be difficult to isolate a single cause of inflation but knowing what inflation is and the conditions that contribute to the rise will bring about progress.
Peace Omenka
Photo Credit: ICIRN