Somehow the furore over removal of fuel subsidy made me miss out on the inflation data released by the Bureau of Statistics. Inflation rate in Nigeria now stands at 10.3% for September from 9.3% in August. According to the Bureau of Statistics who released the data, this was due to the rise in the cost electricity and food prices. You recall the Central Bank had increased Monetary Policy Rate by 2.75% for fear of higher inflationary rates precipitated by the increase in government recurrent expenditure. This driving interest rates to above 22%pa for bank loans.
The bureau has attributed the rise to mainly electricity and food prices. Whilst food prices may seem obvious I am a bit bewildered about electricity. Electricity usage increased in during the month of September as power generation increased above 4,000 megawatt for the first time ever. Since we expect power to increase considerable in the near future, what impact is this having on the wider economy as regards inflation. I won’t worry too much though as the rise in electricity cost should mitigate the increase in fuel expenditure as well.
The rural dwellers continue to feel the pinch of economic hardship as their consumer price index stood at 11.9% with the urban dwellers at 8.4%. The rural dwellers who rely mostly on subsistence farming continue to see a rise in inflation as cost of living drives higher. This obviously pushes more of them to migrate to the urban areas thus increasing the pressures on cities like Lagos, Porthacourt, Kano, Abuja etc.
Bottom line is that price increases are likely to continue in the coming months with almost certainty that the CBN will miss its projected single digit inflation rate. Whether, the increase in the MPR (Monetary Policy Rate) will impact on it is another matter really. As can be seen inflation increased mostly in the food and electricity which bear no direct influence to the rate at which banks lend to the larger society. The rural dwellers at least for as much as I know do not collect loans. Being in the informal sector, their flow of money capital hardly pass through the banks as they don’t borrow or deposit from/to them. As such I don’t expect the MPR rate to impact heavily on them. That is not to rule out the impact of the urban market on the rural as transportation, fuel cost etc still get passed on to the rural market.
See report here