Inflation rate has slowed for seven straight months but Nigerians still feel the pinch with ravaging hunger levels and rising poverty.
According to the World Bank’s latest Nigeria Development Update report, inflation has pushed 8 million Nigerians into poverty between 2020 and November 2021. This is an increase from 7 million reported in June 2021.
According to the report, before inflation started rising steadily from September 2019, there were 83 million poor Nigerians, but the number has risen to 91 million as a result of price shock.
At 15.99 percent in October 2021, Nigeria’s inflation rate is far from the Central Bank of Nigeria’s desired 6-9 percent range.
Economic output in Africa’s biggest oil producer has lagged the pace of population expansion of about 2.6 per every year since 2015, a sign of worsening poverty levels.
Idowu, a housekeeper, told BusinessDay that her children have dropped out of school and they now find it hard to eat twice a day now.
The widowed mother of four explained they used to eat three times a day, but no longer afford that due to the rapid increase in the prices of food items.
Experts say a decline in inflation rate is not an indication that prices have dropped.
“When they say inflation rate is coming down, what is coming down is the rate at which prices are growing. It is not that prices are coming down, Omotola Abimbola, a macro-economist at Lagos-based Chapel Hill Denham said.
“If inflation rate is 14 percent today and it came down from 15 percent last month, it doesn’t mean prices have come down by 1 percent, it only means that the rate at which prices are going up has moderated from 15 percent to 14 percent,” Abimbola said.
Olaolu Boboye, an economist analyst at Cardinal Stone also explained that prices are still rising but at a slower pace.
“The only time you see inflation numbers translating to what you have in the market in terms of decline is when you have continuous moderation in prices over an extended period of time, that is when you will begin to see the impact and this isn’t immediate, it takes a while,” Boboye said.
Nigeria’s failed border closure policy which kicked off in August 2019 as a strategy to boost local production yielded little gains as inflation began rising steadily from September 2019.
Inflation inched down from 11.1 percent in July 2019 to 11.02 percent in August 2019, the lowest reading since January 2016 but rose to 11.24 percent in September 2019 and continued to rise till April 2021 when it hit 17.33 percent.
Africa’s largest economy has also struggled to overcome a more than decade-long Islamist insurgency in the northeast and bandit attacks in the northwest that have disrupted farming and displaced millions. This is also weighing on productivity and causing price increase.
The new Omicron variant has exacerbated inflation uncertainty in many parts of the world as the Covid-19 variant could intensify supply-chain disruptions.
“If the Omicron virus becomes worse particularly in Nigeria, we are likely to find more sanctions in terms of travel ban in Nigeria and that could impact imported food inflation,” Philip Anegbe, head of research at CardinalStone said.
“However, what will really affect our inflation is the impact that will force the government to impose internal restrictions. This is more important because if we look at how food inflation is measured, it is mainly internally produced foodstuff, so if the government imposes domestic restrictions like they did last year, then we expect inflation to jump,” Anegbe said.
According to the World Bank, Nigeria has the 7th highest inflation rate in Africa, and it is one of the few countries where inflation rose as incomes fell.
The Global Hunger Index report also ranks Nigeria as the 103rd of 116 countries, indicating that hunger is severe in the country and may become alarming if nothing is done about this urgently.
“We need to find a way to do long-term reforms that can ensure that we have an inflation rate moderate in a permanent way to a single digit. These reforms have to be structural because Nigeria’s inflation problem is structural in nature which is basically cost-push, particularly in the food sector value chain,” Omotola said.
He also pointed out that Nigeria needs to raise agriculture productivity, solve insecurity challenges and invest more in infrastructure.
The World Bank has also recommended that to reduce the inflation rate, Nigeria must remove FX restrictions on imports of staple foods and medicines in the next three to six months.