Nigeria’s Consumer Prices Index (CPI), commonly known as inflation, accelerated by 12.34 percent in April 2020, marking the eighth-consecutive uptrend since September 2019 and the highest in two years, a BusinessDay analysis shows.
Data from the April 2020 inflation report by the National Bureau of Statistics (NBS) released on Thursday show that inflation rose month-on-month by 12.34 percent, which was 1.02 percentage points higher than the 12.26 percent recorded in March 2020. Also, the percentage difference of 1.02 is the highest recorded since November 2019.
Omotola Abimbola, a macro and fixed income analyst at Lagos-based Chapel Hill Denham, said the major contributor to the increase was the lockdown of economic and business activities which disrupted supply chains, forcing prices to soar in the country.
“Historically, as the country moves deeper into the planting season, typically, you should expect to see a bit of price pressure but the lockdown in April affected a lot of supply chains all over the county. And we could also say that a bit of panic buying by consumers added to the rise,” Omotola said.
The lockdown which lasted for five weeks from March 31-May 3, 2020 was implemented to curtail the spread of COVID-19. From rice to garri and other key food staples, prices made rapid climbs in the country, fuelled by low supplies and panic buying.
According to NBS data, food inflation which constitutes more than 50 percent of CPI rose on month-on-month by 1.18 percentage points to 15.03 percent in April 2020, the highest in 25 months compared to 14.98 percent in the previous month. The rise in the food index was caused by increases in prices of potatoes, yam and other tubers, bread and cereals, fish, oils and fats, meat, fruits and vegetables.
Core inflation, which excludes the prices of volatile agricultural produce, stood at 9.98 percent in April 2020, up by 0.25 percent when compared with 9.73 percent recorded in March 2020.
“With inflation at yet another record high of 12.34 percent amid weak economic conditions, the Central Bank of Nigeria (CBN) is surely in a dilemma between accelerating growth and combating inflation. How they intend to achieve both concurrently is unknown. But we should expect more of unorthodox policy actions,” said Damilola Adewale, a research economist.
Adewale noted that high inflation has implications for households, businesses and investment as it could raise the cost of living for households as they now pay more for food and other basic items, and for investors, it could further wipe off return rate on their investment assets.
It is now about five years since price level has been trending above the CBN’s 6-9 percent target.
Analysts are also expecting further increase in inflation rate in the coming months.
“Although we have further reduction in the prices of petrol which is normally favorable for inflation, we still have a bit of balance of payment challenge that is affecting the exchange rate which will eventually have a pass through effect on consumer prices, and also there is still a bit of disruption in supply chains which are not back to normal even after the ease of the lockdown,” Omotola said.
