Last May, a loaf of 500g of bread cost N456.79, according to the National Bureau of Statistics (NBS), but some in Lagos pay N800 today. The price of bread – one of 12 items tracked monthly to measure the average prices of goods and services across Nigeria – is rising faster than the official inflation figures. To the shock of many Nigerians.
“[Bread sellers] have changed prices three times between now and then,” Rotimi, who works in a private university, told BusinessDay. He also said, “Yam is N3,000 a tuber today. I refused to buy.”
When the rate at which prices rise is fast, it reduces the buying power of some consumers e.g. how much bread they can buy. Besides, the official figures of inflation lag prices of goods and services by a month.
The latest report released by the statistics office showed that the country’s inflation rate in May had accelerated to 17.71 from 16.82 percent in April. The June inflation figure will be released on 15 July.
Prices change at different paces. For instance, the price of a barrel of oil changes daily whereas salaries take a longer time – what economists call “sticky”.
One of the reasons for the price differences across Nigeria is distance between the point of production of the good or service and the point of purchase. The cost of making and moving, and local factors like the state of the roads cause price disparities.
The mismatch among the average prices of bread across Nigeria, based on data from NBS, and what people pay today in Lagos or Aba or Abuja is also because of what economists call price discrimination – that is, when a good or service is sold at different prices.
Read also:Bread price rises 35% in one year
In a Twitter conversation on the price of gas, , @ogunwaref, said that the price of 12.5kg of gas at his location was N10,800 while in another tweet @rhodesvigil in Nasarawa State, said she bought it for N12,500.
The Consumer Price Index (CPI), which measures the level of retail prices of goods and services at a specific point in time, is one of the most commonly used measures of inflation as it reflects changes to a consumer’s cost of living, according to Investopedia.
The CPI is calculated by indexing a group of goods and services based on the country’s consumer buying pattern.
This group of goods is called the basket of goods and services’; it contains food items, alcoholic and non-alcoholic beverages, clothing, footwear, housing, water, electricity, fuel, transport and other goods and services needed for everyday life.
The increase or decrease in prices of all the items when expressed as a percentage represents the inflation rate.
According to the NBS, the first stage in the calculation of the CPI is the collection of prices on each item (740 goods and services) from outlets in each sector (rural or urban) for each state.
“Prices are then averaged for each item according to sector across the state. The next step is to use the average price to calculate the basic index for each commodity: The current year price of each commodity is compared with a base year’s price to obtain a relative price,” it said.
The following are the items that make up basket of goods and services tracked to measure inflation in Nigeria: (500g); boned beef (1kg); Titus fish (medium); evaporated milk (170g); a dozen crate of eggs; a small tuber of yam; imported rice (1kg); vegetable oil (1 litre); gas (12kg); petrol (1 litre) and diesel (1 litre).
