From John Ofikhenua and Nduka Chiejina Abuja
The National Bureau of Statistics (NBS) yesterday said inflation rose by 12.82 per cent in July 2020.
NBS, in its “Consumer Price Index (CPI) and Inflation Report July 2020,” said the increase is 0.26 per cent points higher than the rate recorded in June (12.56 per cent).
It said in the period under review, increases were recorded in Classification of Individual Consumption by Purpose (COICOP) divisions that yielded the headline index.
The report said monthly, the headline index increased by 1.25 percent in July.
This, said the NBS, is 0.04 per cent rate higher than the rate recorded in June 2020 (1.21) per cent.
The corresponding 12-month year-on-year average percentage change for the urban index was 12.66 per cent in July, it said.
The report said this is higher than 12.50 per cent reported in June, while the corresponding rural inflation rate in July 2020 is 11.49 per cent compared to 11.36 per cent recorded in June.
The Bureau said the urban inflation rate increased by 13.40 per cent (year-on-year) in July 2020 from 13.18 per cent recorded in June 2020, while the rural inflation rate increased by 12.28 per cent in July 2020 from 11.99 per cent in June 2020.
On a month-on-month basis, the report said, the urban index rose by 1.27 per cent in July 2020, up by 0.04 from 1.23 per cent recorded in June 2020, while the rural index also rose by 1.23 percent in July 2020, up by 0.04 from the rate recorded in June 2020 (1.19) per cent.
Tye report added: “On month-on-month basis, the Headline index increased by 1.25 per cent in July 2020. This is 0.04 per cent rate higher than the rate recorded in June 2020 (1.21) per cent.
“Increases were recorded in all COICOP divisions that yielded the Headline index. The consumer price index, (CPI) which measures inflation increased by 12.82 percent (year-on-year) in July 2020. This is 0.26 percent points higher than the rate recorded in June 2020 (12.56) percent.
“The percentage change in the average composite CPI for the 12 months period ending July 2020 over the average of the CPI for the previous twelve months period was 12.05 per cent, representing a 0.15 per cent point increase from 11.90 per cent recorded in June 2020.”
Inflation figures have been attributed to increase in Value Added Tax (VAT), pump price of fuel, border closure, COVID-19 impact on supply chains and insecurity in the food belt regions of the country.
President, Association of Capital Market Academics of Nigeria and Chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch, Prof. Uche Uwaleke who reacted to the release of inflation figures by the National Bureau of Statistics (NBS), said “the rising inflation in the country amidst downturn in economic activities is quite worrisome”.
He said the figures showed that the country is going through stagflation “which further complicates monetary policy against the backdrop of forex market illiquidity and rising unemployment similar to the country’s experience during the 2016-2017 recession”.
Stagflation is persistent high inflation combined with high unemployment and stagnant demand in a country’s economy. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.
“This upward inflationary trend is the pass through to commodity prices of increase in VAT and the pump price of fuel, border closure, COVID’19 impact on supply chains and insecurity in the food belt regions of Nigeria,” he said, adding that it is also a reflection of the high exchange rate.
The best way to rein-in the rising inflation he suggested “is for monetary and fiscal policies to synchronise in addressing the major inflation driver which is the food component that is in excess of 15per cent”.
On the fiscal side, he said: “It is important that the government puts on its fighting gloves to wrestle the incessant bandit attacks on farming communities even if it means overhauling the entire security apparatus.”
Prof. Uwaleke commended the Federal Government for articulating “a good massive agricultural programme in the Economic Sustainability Plan. The time for aggressive implementation is not tomorrow, not even today, but now!”
The don noted that with respect to monetary policy, the rising inflation rate may compel the CBN to further tighten policy given its primary mandate of price stability.
This move he however cautioned “may roll back any progress recorded in the area of stimulating economic growth”.
He advised the Monetary Policy Committee (MPC) of the CBN to continue to “maintain status quo with regard to the policy parameters while focusing attention on how to improve liquidity in the forex market including through the on-going unification of exchange rates”.
“There is no doubt that the CBN has done a lot in pursuit of its developmental function to stimulate the growth of the Agriculture sector in particular. I am confident that in the coming months, the impact of these interventions, including the recent non interest financing schemes for the Agric value chain, will reflect on bountiful harvest and help moderate inflation rate,” he said.