Nigerian authorities have revealed that the country’s inflation hit a four-year peak in February as food prices jumped over 20%.
According to the National Bureau of Statistics (NBS), inflation in Nigeria has consistently been on the increase for 12 months. The data by the Bureau showed an increase from 12.2% in February 2020 to 17.33% in February 2021.
The inflation reading, is the highest since the 17.78% recorded in February 2017. The economy was in a slump then and experts say it’s hovering on the brink of recession now, having expanded just 0.11% in the fourth quarter.
The NBS also indicated that food prices, which make up the bulk of the inflation basket, rose 21.79% in February. This, according to the Bureau, represents a jump of 1.22 percentage points in January.
“This increases in prices of bread and cereals, potatoes, yam and other tubers, meat, food products, fruits, vegetable, fish and oils and fats, caused the rise in the food index.”
NBS explains
According to the report, increases were also recorded in all 12 Classification of Individual Consumption According by Purpose (COICOP) divisions that yielded the headline index.
The COICOP includes food and non-alcoholic beverages, alcoholic beverages, tobacco, and kola, clothing and footwear, housing, water, electricity, and gas. Others are health, transport, communication, recreation and culture, education, restaurants and hotels, miscellaneous goods and services, household equipment. and furnishings.
The NBS had earlier reported in its ‘Unemployment and Underemployment Report’ that about 23.18 million Nigerians are currently unemployed.
The report also indicated that the country’s unemployment rate rose to 33% in the fourth quarter of 2020, from 27.1 percent recorded in the second quarter.
Inflation by states peak
According to the NBS, all-items inflation on year-on-year basis was highest in Kogi at 24.73%; Bauchi at 22.92%; and Ebonyi at 20.45 %. In comparison, Enugu recorded 14.73% rate; Kwara, 14.25%; and Cross River, 12.97%, in the slowest year-on-year inflation rises.
Also, year-on-year food inflation was highest in Kogi which reported 30.47% inflation rate; Ebonyi, 25.73%; and Sokoto, 25.68 %. In comparison, Gombe reported 19.32%, Bauchi, 18.74%, and Akwa Ibom, 18.70% recorded the slowest rises of year-on-year food inflation.
Monetary policy
Given the low-growth and high-inflation backdrop, analysts expect the Nigerian Central Bank to either raise or lower its base rate of 11.5% when it holds a policy meeting next Tuesday, 23rd March.
Commenting on the issue, Bismarck Rewane, Managing Director at Lagos-based Financial Derivatives advised the central bank to “encourage savings and investments” to help employment.
“They should be thinking of tightening to encourage savings and investment which could help employment. But I think we may have reached the limit of what can be achieved with changes to monetary policy.”
Bismarck Rewane
Meanwhile, the International Monetary Fund, which said in February that the bank might need to tighten policy if inflation got out of control, has urged it to phase out financing of the government deficit to help check price pressures, and to allow the naira to float more freely.
The central bank has tried to manage pressure on the currency by restricting access to dollars for certain imports to boost local production, and set up multiple currency rates.
Such “subsidised credit” had clearly failed to prevent a rise in near-term inflation, said Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered.
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