Nigeria’s headline inflation rose to 18.60 percent in June 2022 on a year-on-year basis, the National Bureau of Statistics (NBS) announced on Friday. The current level is higher than the 17.71 percent recorded in May 2022 and 17.75 percent in June 2021.
The mounting inflationary pressures in Nigeria have further confirmed the concern raised by the World Bank in its 2022 report that more Nigerians would be pushed into poverty if nothing concrete was done.
“Before the Russia-Ukraine war, higher inflation pushed an estimated 8 million more Nigerians into poverty between 2020 and 2021. In 2021, inflation averaged 17 percent, undermining Nigeria’s economic recovery by eroding the purchasing power of the most vulnerable households. We project that the added inflationary pressure emanating from the war could push as many as one million more Nigerians into poverty, on top of the six million already projected before the war”, the World Bank said in June 2022.
On a month-on-month basis, inflationary pressures also increased to 1.82 percent in June 2022 compared with 1.78 percent in May.
Since the beginning of the year, food inflation has been responsible for the uptick in Nigeria’s inflation as a result of farmers’ inaccessibility to their farms due to the widespread insecurity and the food scarcity was further worsened by the Russia-Ukraine crisis.
Last Friday, the NBS announced that the food inflation component rose for seven straight months to 20.60 percent in June 2020 as against 19.50 percent in May this year. Correspondingly, the month-on-month increase was 2.05 percent in June 2022 in contrast to 2.01 percent in the previous month.
“Nigeria’s rising inflation could partly be attributed to the knock on effect of the price of diesel which has increased by approximately 278.01 percent since January 2022. Many companies or businesses depend on diesel to power their generators as well as trucks used to transport food items.
Read also: Government must prioritise spending on infrastructure development – President, ECOWAS Bank
“Apart from the power costs, most MNCs, SMEs and traders have been sweltering under the impact of dollar scarcity and a depreciating exchange rate. The combined effect of power costs, exchange rate depreciation and money supply saturation will worsen Nigeria’s inflation for June and July”, Abdulrauf Aliyu, an economist with Fringe Insight, an Africa-focused consultancy firm based in Kaduna State, said.
He added that the middle and lower-class citizens are facing a confluence of economic hard times which he attributed to the power supply situation that has gone from bad to worse in the country.
Confirming the state of the power situation in the country, a recent survey conducted by BusinessDay found out that 8 out of 10 Nigerians lacked 10 hours of power supply daily with the worst hit regions being the northeast, southeast and south-south geopolitical zones.
Across the states of the federation, 18 states recorded inflation rates higher than the national average of 18.60 in June 2022. The worst hit states are Bauchi, Kogi and Ebonyi. The inflation rate hit 21.99 percent in Bauchi; 21.37 percent in Kogi; 20.73 percent in Ebonyi; 20.65 percent in Rivers, and 20.03 percent in Ondo States.
On the other hand, the states with the least inflation rates in the country are Kwara, 17.56 percent; Osun, 16.82 percent; Jigawa, 16.37 percent; Sokoto, 16.31 percent, and Adamawa, 16.14 percent.
Responding to the rising inflation rates in Nigeria, the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate(MPR) to 13 percent. Industry stakeholders are already envisaging reactions from the CBN to curtail the rising prices of goods and services.
Tajudeen Ibrahim, a senior analyst with Chapelhill Denham anticipates the CBN to react again if the trend continues into the fourth quarter of 2022.
“A slight rate hike is possible in Q4 2022 if inflationary pressure intensifies”, Ibrahim said.
Meanwhile, the African Development Bank (AfDB) suggests that a combination of both monetary and fiscal approaches will be needed to address the inflation scourge on the continent, in view of the presence of a high number of vulnerable people in Africa.
“A tighter monetary policy that targets inflation should be complemented with a carefully calibrated fiscal policy response to support the recovery and protect the most vulnerable people. Supporting the most vulnerable will require reprioritising spending and better targeting social safety nets. Net oil exporters could use the fiscal windfall created by higher oil prices to build fiscal buffers and support recovery and the most vulnerable”, AfDB said in its African Economic Outlook 2022.
