Tuesday Column By VICTORIA NGOZI IKEANO
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Away from the statistical analysis of current inflation rates by economic experts, the ordinary woman on the street that frequents the market and is more in touch with reality is equating today’s rather rapid rise in commodity prices to what obtained around 2016. As with that time when retail prices of consumer goods were increasing literally every day, so it is today, although the factors that brought about such astronomical rise in comparison to their prior rates are different. The common thread weaving through both situations is, setting in of recession, an economic ‘jargon’ that is meaningless to the common man/woman who is more concerned with his/her purchasing power, that is, the quantity of goods his take home pay can buy. This has been declining in recent months. As majority of Nigerians are unemployed or underemployed, the bench mark for the average Nigerian in gauging inflation rate is comparison of prices in absolute terms rather than the percentage term of experts. Such percentage analysis may not readily sink in and they may plot a graph to give you a better visual grasp. Still the absolute price term of the ordinary woman/man gives an immediate grasp. Let us thence consider the inflation trend from this perspective, using the common staple in Nigeria, rice as an example.
In early December 2019 a bushel at the Lafia rice mill was selling for about N5000; in late January/February, N6000, by late April/May N7000, July N8000 and now N9000. This is a commodity that ordinarily, in normal times sells for an average of N4000 per bushel. Since buying in bushel is now out of reach of most households, they have turned to buying in smaller measures (mudu) which is no less expensive. A mudu of rice which in ‘normal’ times sold for about N200 today goes for N700. Its price trajectory per mudu/measure was N250, N300, N350, N400, N500, N600 and now N700. Consequently, many families have drastically cut down their rice consumption to once a week, instead of the usual practice of consuming it at least twice weekly. All prices quoted above are of course for local rice. For those that are curious, a mudu/measure of foreign rice cost N1, 200 now. Whether analyzing from percentage increase terms or absolute price increases, the fact of the matter is that Nigeria’s inflation rate has been rising in recent times.
According to the Consumer Price Index of the National Bureau of Statistics for the second quarter of this year, the country’s inflation rate increased by 12.82 percent (year-on-year) in July compared to 12.56 per cent recorded in June 2020. According to experts, “this is the highest monthly inflation rate in 27 months since March, 2018 when headline inflation was 13.34 percent”. The report revealed that Nigeria’s inflation rate has risen steadily for 11 months from 11.02 per cent in August 2019 to 12.82 per cent in July 2020. In particular the composite food index increased by 15.48 percent in July 2020 compared to 15.18 per cent in June 2020, representing 0.34 per cent rise compared to June. What is clear is that price increments have continued since that July figures were reeled out through August 2020. On yearly basis, our inflation rate rose by 6.67 per cent in 2015 to 15.68 per cent in 2016 and stood at 16.52 percent in 2017, an increase of 0.85 percent over the previous year’s figure. It then dropped to 12.09 percent in 2018 and fell again to 11.40 per cent last year.
The steep rise in Nigeria’s inflation rate in 2016 is attributable in part to the delay in composition of the federal cabinet. President Mohammadu Buhari upon assuming office in May 29/ June 1, did not constitute the federal executive council until five months later in November. He spent the period presumably studying what he met on ground, receiving briefings from ministries, departments and agencies of government. There was inactivity in many sectors. The lull enabled some elements to ship foreign exchange abroad or hide same. Sooner than later, there was a shortage in foreign exchange receipts compared to demand for it. And a President Buhari, a disciplinarian from his military background who had stood his ground not to devalue the naira for whatever reason was forced by market forces of demand and supply to yield ground. This had its own impact on retail prices and the inflation rate for 2017 as our economy is largely import-dependent. Therewith the inflation rate rose to 16.52 percent in 2017, the highest so far since Buhari’s administration. This administration’s first year can be considered as a learning curve. It’s lukewarm attitude during this time, especially on economic matters left much to be desired and it contributed in plunging the nation into economic recession; albeit it soon paddled the country out of it and began to put its house in order somehow as inflation rate dropped to 12.09 per cent in 2018 and down again to 11.40 percent last year, 2019. More importantly, the fact that our inflation rate has still not fallen to a single digit means the country is still in some economic distress.
And what will the overall inflation figure for 2020 be? Indications are that we shall witness another steep rise. And as in 20116/2017, Nigeria is going into recession. Whereas in 2016/2017 the high inflation figures and economic recession were self-induced more or less, the high inflation rate this time is brought about largely by external factors, largely by the new corona virus pandemic that led to little or no economic and industrial activity for several months worldwide as nations across the globe locked down. This had dire implications for an import dependent nation as ours and one that relies majorly on oil for its revenue. The result is a sharp fall in government’s revenue, both foreign exchange and naira receipts. Another factor is late rainfall in parts of the country as well as predicted flooding in some States that would wash out crops, impacting food supply. So, as in 2016/2017 there is high inflation, the naira is being devalued and the nation is also in recession. Whether it would go from recession to depression remains to be seen.