Rising cost of transportation, depreciation of the Naira as well as the ongoing Russia-Ukraine war have been identified as factors pressuring Nigeria’s inflation rate which hit a new high of 17.71 per cent in May.
This is the sixth consecutive month of rise in inflation and also the highest point in 11 months.
Meanwhile, the International Monetary Fund, IMF, yesterday joined the World Bank to express concerns over rising inflation on the welfare of Nigerians, saying 40 percent of the population now live below the poverty line due to the impact of rising food prices.
Economists and financial analysts yesterday, noted that the recent move by the Central Bank of Nigeria, CBN, to raise Monetary Policy Rate, MPR, to 13 per cent from 11.5 per cent to tame inflation was not expected to have any material impact on the supply-driven price surge.
The National Bureau of Statistics, NBS, in its Consumer Price Index, CPI, report released yesterday said food inflation rose to 19.5 per cent in May from 18.37 per cent recorded in the previous month due to increases in prices of bread and cereals, food products, potatoes, yam, and other tubers, wine, fish, meat, and oils.
The report further stated: “Increases were recorded in all Classification of Individual Consumption According to Purpose (COICOP) divisions that yielded the Headline index.
“On a month-on-month (MoM) basis, the headline inflation rate increased to 1.78 per cent in May 2022, this is also 0.02 per cent rate higher than the rate recorded in April 2022 (1.76) per cent.”
On food inflation, NBS said:”The composite food index rose to 19.50 per cent in May 2022 on a YoY basis; it declined by 2.78 per cent compared to 22.28 per cent in May 2021.
“On a MoM basis, the food sub-index increased to 2.01per cent in May 2022, up by 0.01 per cent points from 2.00 per cent recorded in April 2022.”
In the inflation forecast for May 2022, analysts at Access Bank Plc said: “The faster rise in the general price level is due to several factors. Firstly, imported inflation arising from the ongoing Russia-Ukraine war. The crisis has aggravated supply chain disruptions which had existed at the onset of covid-19. Multi-year highs were recorded in the inflation rate across many advanced economies. These price increases are transmitted into the Nigerian economy via high prices of imported consumer and capital goods.
“Secondly, supply disruptions of agricultural produce due to insecurity concerns in food basket states also contributed to rising price levels.
“Food and energy prices edged northwards in May due largely to currency depreciation and transportation costs.”
On their part, analysts at Commercio Partners said: “In our view, the upside risks to the trend of inflation in coming months remain predominant, as tensions in Eastern Europe continue to run amok, while the local economy stays structurally susceptible to such headwinds.
“Back at home, the move to hike the benchmark interest rate to tame inflation is not expected to have any material impact on the supply-driven price surge, particularly when actions to attract foreign investors and improve the exchange rate situation, by significantly raising rates on instruments like the OMO bills, have not been effected.
“Elsewhere, low food harvests from 2021 could weigh further on staple food prices pending the year-end main harvest, albeit with the ongoing southern green harvest providing some support.
“On the policy end, the monetary authority is likely to sustain a hawkish stance in the second half of the year, although a momentary wait-and-see approach could be initially adopted to better assess the impact of the recently instituted rate hike.”
IMF expresses concerns
Recall that the World Bank on Tuesday, in a report, ‘Nigeria Development Update’, NDU, had said that rising inflation aggravated by the war in Ukraine is likely to push an additional one million Nigerians into poverty by the end of this year, in addition to the six million Nigerians that were already predicted to fall into poverty this year because of the rise in prices, particularly food prices.
The IMF expressed a similar concern in a statement yesterday by the IMF Mission Chief for Nigeria, Ms. Jesmin Rahman, following meetings with Nigerian authorities on recent economic and financial developments, and the economic outlook for the country.
She said: “Economic recovery continues to gain strength on the back of services and agriculture with GDP growth reaching 3.6 percent Year-on-Year, YoY, in Q1 2022. Latest data shows economic growth broadening to all sectors except oil, where production remains weak reflecting continued security and technical challenges.
“Inflation has reached 17.7 percent YoY in May led by a renewed surge in food prices, exacerbated by the war in Ukraine, and raising food security concerns as over 40 percent of the population live below the poverty line.”