The Consumer Price Index (CPI) which measures the average change over time in prices of basket of goods and services consumed by the people highlights a list of components under food and beverages, apparel, housing, transportation, education and communication, recreation, medical care as well as other goods and services.
Inflation, the percentage change in the Consumer Price Index (CPI), increased by 0.12 percentage point from 11.25 per cent Year-on-Year (YoY)in March 2019 to 11.37 per cent YoY in April 2019. On Month-on-Month (MoM) basis, the headline index which was garnered from the divisions of all Classification of Individual Consumption by Purpose (COICOP) increased to 0.94 per cent in April 2019, this figure represents 0.15 percentage point higher than the preceding month.
On a 12-month average, the percentage change in the average composite CPI ending April 2019 over the average of the CPI for the previous 12 months was 11.31 per cent; this figure was down by 0.09 per cent from the index recorded in March 2019.
Similarly, urban inflation rate was up by 0.16 per cent to 11.70 per cent YoY in April 2019 from 11.54 per cent recorded in March 2019, while rural inflation rate upturned by 0.09 percentage point from 10.99 per cent in March 2019 to 11.54 per cent YoY in April 2019.
The analysis of the CPI data on a MoM basis showed that the urban inflation rate was up by 0.19 per cent from 0.81 per cent recorded in March 2019, while the rural index similarly rose by 0.13 percentage point from March 2019 to 0.90 per cent.
The percentage change in the average urban CPI as well as rural CPI for the 12-month period ended April 2019 over the average urban and rural CPIs for the previous 12-month period was 11.69 per cent and 11.00 per cent respectively. These figures were down by 0.09 per cent and 0.08 per cent in the urban and rural indices respectively from the 11.78 per cent and 11.08 per cent recorded in March 2019 respectively.
Imported food price inflation of the composite CPI majorly inspired the hike as it was up by 0.09 per cent to 15.68 per cent YoYin April 2019 from 15.59 per centcrecorded in March 2019. It became evidently that it was higher in urban centres—16.14 percent YoY in April 2019 (from 11.54 per cent in March) than in rural communities—15.30 per cent YoY in April 2019 (from 15.17 per cent in March).
Similarly,imported food inflation of the composite CPI came to 1.24 per cent MoM in April 2019 from 1.22 per cent recorded in March 2019 leading to an upturn of 0.03 percentage point. In urban and rural communities, imported food inflationary figure came to 1.28 per cent MoM and 1.22 per cent MoM respectively in April 2019. These figures surged by 0.02 percentage point and 0.04 percentage point respectively from the previous month.
The continuous increase in the imported food inflation value implies that the prices of imported food commodities are also increasing. Upward movement in prices will then suggest that:
- Domestic demand of imported food is also increasing. If demand for imported food increases, then the naira price of imported food will also increase. This implies that the domestic supply gap is widening which is being filled by imported food commodities.
- The growing demand for imported food implies growing import bills; which will lead to the erosion of the value of the naira, and consequently lead to implicit exchange-rate pass-through of inflation.
Although, the analysis of the inflation indices (both YoY and MoM)categorised bythe country composite index, urban index and rural index showed that imported food inflation was generally the highest, these do not tell the true story as imported food inflation is relatively stable compared to “Food” and “Food& Non-Alcoholic Beverage” which showed more inflationary pressure.
A major factor in the “Food” and “Food & Non Alcoholic Beverage” inflationary pressure is seasonality. As the country gradually approaches the planting season, more pressure will be put on the existing reservoir of the commodities to sustain the demand.
The CPI chart above tells a story of the inflationary pressure on the urban and rural communities. In the urban communities, there are relatively stable price levels recorded in April 2019 in “All items less farm produce, ”, “Imported Food”, “Clothing and Footwear”, “Furnishings & Household Equipment Maintenance”, “Health”, “Communication”, “Education”, “Restaurant & Hotels” and “Miscellaneous Goods & Services” with relatively low MoM changes in inflation value (less than 0.031 per cent) in comparison to March 2016.
Similarly in April 2019, “Transport”, “Communication”, “Education” and “Restaurant & Hotels” recorded relatively stable price levels in the rural communities due to the relatively low MoM changes in inflation value (less than 0.031 per cent).
Other basket of goods and service in the chart above showed relative MoM inflation value increase more than 0.03 percentage point. The highest change in the MoM inflation index between April 2019 and March 2019 was 0.34 percentage point recorded for “Food” in the urban inflationary index, followed by 0.33 percentage point in the “Food & Non Alcoholic Beverage.” These percentage points change shows that there is inflationary pressure on the commodities.
Conclusion
These numbers tell a story about the growing hunger and poverty which is widespread in the country. We need to be more intentional and strategic about issues of poverty, population, unemployment and other welfare indices.When the inflation rate is above 9 per cent, the policy target is often to bring inflation rate down to single digits and by extension to encourage lower real interest rate environment. At such, the government may require urgent policy by the federal government to stem the tide.
