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Nigeria’s inflation surges despite drop among Sub-Saharan African peers

Nigeria’s inflation surges despite drop among Sub-Saharan African peers

While the headline inflation rate for some Sub-Saharan African (SSA) countries eased in January 2023, Africa’s biggest economy saw an increase after easing in December.

BusinessDay analysis of data from the SSA statistical agencies shows that South Africa’s inflation moderated to 6.9 percent in January from 7.2 percent in December, Kenya’s inflation slowed to 9.0 percent from 9.1 percent and Angola’s inflation fell by 15.11 percentage points to 12.55 percent.

For Nigeria, it rose by 0.47 percentage points to 21.82 percent from 21.34 percent, according to the National Bureau of Statistics (NBS).

“In line with the moderation in global commodity prices, most countries in the SSA region saw a further decline in inflation,” analysts at Financial Derivatives Company (FDC) said in their latest Economic Bullet report on Tuesday.

It said the downward inflation trajectory is attributable to the sustained decline in global food prices and the relative stability of some of the economies’ currencies.

According to the Food and Agriculture Organization’s (FAO) price index, global food prices fell in January for the 10th consecutive month, following Russia’s invasion of Ukraine last February.

The price index, which tracks the most globally traded food commodities, averaged 131.2 points last month, against 132.2 in December.

The NBS report further revealed that Nigeria’s food inflation rate was 24.32 percent in January, up from 23.75 percent in December and 17.13 percent in the same period of last year.

“The rise in food inflation was caused by increases in prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, vegetable, fruits, meat, and food products,” it said.

Core inflation, which excludes the prices of volatile agricultural produce, stood at 19.16 percent, up by 5.29 percent when compared to 13.87 percent recorded in January 2022.

“Many analysts believe that while the moderation in December likely purports that Nigeria’s inflation might have reached a tipping point, inflation could likely edge higher in January,” the FDC report said.

“This is because of more recent events like the naira crunch, the energy crisis and heightening transportation costs which will be more reflected in inflation numbers,” it added.

Last October, the Central Bank of Nigeria (CBN) announced that higher denominations of the naira such as N200, N500 and N1, 000 would be redesigned and introduced into the economy from December 15, 2022.

The CBN also said the deadline for the collection of the old naira notes was January 31, 2023. But it was extended till February 10.

But for more than two weeks, cash, including old and new naira notes, has been unavailable from banks’ Automated Teller Machines (ATMs) and over the counters.

This has made bank customers who need small cash to pay for transport fares, and other urgent needs to not be able to find money to withdraw from the ATMs. However, a few ATMs that are dispensing cash are crowded.

More worrisome is the fact that some banks’ ATMs only dispense N1,000 per transaction with N35 charges for other banks’ ATM cards. Point of Sales operators charges N1,000-2,000 to exchange N10,000 old notes for new naira.

Read also: Manufacturers’ confidence in Nigerian economy drops on inflation, FX crisis

These developments pushed Nigerians to sort unconventional steps to secure cash such as sleeping at the ATM terminals, running half naked in banking halls, fighting bank staff, and protesting and destroying properties at the banks.

For energy, the scarcity of petrol which has been prolonged since the fourth quarter of last year has seen its pump price increase to N300 per litre from N170. This has led to long queues across petrol stations and hikes in food and transport costs across the country.

“The high cost of the product (petrol) is translating to increasing cost of transportation, services, and dwindling household incomes. Commuters have witnessed at least a 200 percent hike in the cost of transportation, and this continues to deplete the income of low-wage earners,” analysts at CSL Stockbrokers Limited said in a recent report.

The cost of doing business has also increased significantly. “Given the poor state of power in the country, many businesses are forced to run on alternative power and the scarcity of petrol causes a huge challenge for them,” the analysts said.