Nigeria’s inflation drops, but economy still in slump

May 18, 2021
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THE Consumer Price Index (CPI) released on Tuesday by the National Bureau Statistics (NBS)  indicated that the country’s inflation rate dropped to 18.12 per cent in April, from 18.17 per cent  recorded in March, 2021.

This was 0.05 per cent point lower from the rate recorded in March and the first drop in 21 months.

It is also an indication that the cost of living is not reducing significantly fast in Africa’s most populous nation.

An associate at PwC Seyi Kolawole explained that it was not time to cheer yet.

Kolawole said as an economic analyst, he was surprised with the drop considering the present insecurity and hunger in the country. “This present inflation rate doesn’t reflect the present economic realities the country is faced with. The managers of the economy would have to come and explain to us,” Kolawole said.

The report, published by the National Bureau of Statistics (NBS), also revealed that food for the increasing number of poor Nigerians was not getting cheaper as fast as it should be, as food inflation dropped from 22.95 per cent in March to 22.72 per cent in April.

Inflation rate. Infographics by Samson Samuels

“This rise in the food index was caused by increases in prices of coffee, tea and cocoa, bread and cereals, soft drinks, milk, cheese and egg, vegetable, meat, oils and fats, fish and potatoes, yam and other tubers,” NBS explained.

According to the report, increases were recorded in the 12 Classification of Individual Consumption According by Purpose (COICOP) divisions that yielded the headline index.

The COICOP included food and non-alcoholic beverages; alcoholic, and beverages; tobacco, and kola; clothing and footwear; housing and water; electricity, and gas; as well as furnishings and household equipment.

Others were health, transport, communication, recreation and culture, education, restaurants and hotels, miscellaneous goods and services.

This drop in the inflation rate is the first since the closure of land borders in August 2019. Analysts have said the closure of the country’s land borders was a major driving force for the upward trend of inflation rates in the country in the last 18 months, which, according to the NBS data, started in September 2019.

Amid the drop in inflation, the Nigerian economy is still in a slump. Food is still expensive for the poor, and unemployment at 33.3 per cent means life is tough in Africa’s most populous nation. About 105 million people are in extreme poverty, with misery index high, analysts say.

“The drop in inflation does not mean much at the moment. Nothing has changed and life is still tough,” Ike Ibeabuchi, manufacturer and player in the services sector ,said.

In April, Director-General of the Manufacturing Association of Nigeria (MAN) Segun Ajayi-Kadir said the inflation rate of March was ‘unhealthy and worrisome,’ most especially for the manufacturing sector, which remained in recession even after the technical exit of the country’s economy.

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According to Ajayi-Kadir, the sector’s low competitiveness was a significant contributor to the low-export penetration of goods manufactured in the country into the international market. He said there was an urgent need for the government to ensure price stability before the situation became deplorable intentionally.

“This can be achieved by deliberately and sincerely partnering the productive sector to grow non-oil export. The Federal Ministry of Finance and CBN should work more closely when designing policies that affect the real sector of the economy to prevent a situation where policies are working at cross purposes,” Ajayi-Kadir said.

He said, for instance, that while CBN was creating funding windows at a single-digit interest rate to encourage production, the government was  raising the Value Added Tax (VAT) from five per cent to 7.5 per cent. Similarly, the government, he said, also increased minimum wage and also allowed an increase in electricity tariff.

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