Nigeria’s headline inflation raced to 19.64 percent in July 2022 on a year-on-year basis, the highest in 16 years and 10 months, according to data from the National Bureau of Statistics (NBS).
The July inflation figure is higher than the 18.60 percent recorded in June 2022, and the 17.38 percent attained as of July 2021. The last time Nigeria recorded a higher inflation figure than the July level was in September 2005, when the headline inflation was 24.3 percent.
Nigeria’s inflationary pressures came largely from rising food prices as food inflation for July rose for the fifth consecutive month to 22.02 percent, higher than 20.60 percent in June 2022 and 21.03 percent in July 2021. At the current rate, the core inflation at 16.26 percent is the least when compared with the headline inflation and food inflation.
“This rise in food inflation was caused by increases in prices of bread and cereals, food products n.e.c, potatoes, yam and other tubers, meat, fish, oil, and fat,” the NBS said.
Nigeria is battling multiple socioeconomic shocks – insecurity, energy supply crunch, poverty, climate change, inflation, and exchange rate volatility, analysts at Financial Derivatives Company Limited said in their latest economic report.
They said: “Recently, the naira began a free fall that made it exceed the N700/$ psychological line, before appreciating to N650/$ and later depreciating to N680/$. Some even say the naira is jinxed and expect a sharp plunge in value to N1,000/$ soon.
“Sadly, this fall could even be greater as we continue to practice the multiple exchange rate system that is highly distortionary. This will fuel the fire of arbitrage, speculative activities, and heightened inflationary surge.”
Nigeria’s July inflation has surpassed the 15.5 percent projection made by the World Bank for the year. It also exceeded the 19.4 percent and 19.5 percent projected by Bloomberg and Capital Economics respectively.
“The rise in food inflation has a bit further to run before softening global agricultural prices feed through. And in turn that will push down the headline inflation rate. That said, the distortionary FX policies and the possibility that the government increases its reliance on deficit monetisation will keep the naira under pressure, fuelling imported price pressures,” London-based Capital Economics said on Monday.
Amid growing petrol subsidy burden, the Federal Government turned to the Central Bank of Nigeria for N2.45 trillion in the first half of this year, bringing its total debt to the apex bank to N19.91 trillion as of June.
The mounting inflationary pressures are coming at a time of dwindling revenue for the Nigerian federal government caused by the country’s inability to meet the production quota allocated to it by the Organization of Petroleum Exporting Countries.
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A significant portion of the domestic crude oil production is stolen by pipeline vandals and oil thieves, while a bulk of the revenue made from crude oil sales is spent subsidising imported petrol, leaving the country with very lean resources for developmental purposes.
Timipre Sylva, minister of state for petroleum resources, while on an official visit to Imo State early August, said Nigeria was losing about 400,000 barrels of crude oil to oil thieves monthly. Mele Kyari, managing director of NNPC Limited, said Nigeria lost $1.9 billion to crude oil thieves monthly.
“That inflation is still rising is not unexpected, when we consider the increase in the prices of commodities and the persistent weakness in the exchange rate of the domestic currency against major currencies of the world,” Moses Ojo, a Lagos-based economic analyst, said.
The lean resources available to the Nigerian government have negatively impacted its productivity. According to Zainab Ahmed, minister of finance, budget and national planning, in the first four months of 2022, Nigeria generated only N1.68 trillion as revenue against N4.77 trillion expenditures, leaving it with a fiscal deficit of N3.09 trillion.
Analysts are of the opinion that inflation has not peaked, citing the weakening exchange rate and insecurity that has disrupted farming activities in major agricultural belts in the country.
“Across the world, no one can say for sure that inflation has peaked; Nigeria is no exemption. This is because major economic indicators in Nigeria have not shown the signs that inflation is almost at its peak,” Tunde Abidoye, head of research at FBNQuest, said.
Food prices data from NBS showed that the price of wheat flour (Golden Penny 2kg) increased by 35.23 percent in June this year. The prices of 500g bread, sliced and unsliced, rose by 31.8 percent and 32.9 percent respectively in the same month. The prices of brown beans, and beans white black eye (sold loose) increased by as much as 16.6 percent and 24.2 percent respectively.
Across the states of the federation, inflation is highest in Akwa Ibom, Ebonyi, Kogi, Bayelsa and Rivers states at 22.88 percent, 22.51 percent, 22.08 percent, 21.60 percent, and 21.37 percent respectively.
On the other hand, the lowest inflation rates were recorded in Enugu, 18.18 percent; Osun, 18.08 percent; Borno, 18.04 percent; Kaduna, 17.04 percent, and Jigawa, 16.62 percent.
