The National Bureau of Statistics has reported that inflation rate for the month of May was 9%. This represents a 0.3% rise from April 2014 and the highest month on month percentage change since June/July 2013.
Nigeria’s inflation rate has been rising every month since November 2014 when it was 7.9%. This month’s 9% is incidentally the highest since May 2013 when it hit 9% as well.
According to the National Bureau of Statistics, inflation rose higher due to a higher increase in food prices .
Food prices edged higher in May as a result of the late onset of rains which have pushed back the harvest season coupled with higher transportation costs due to limited Premium Motor Spirit (PMS) availability. The Food Sub-index rose by 9.8 percent (year-on-year) in May, up by 0.3 percentage points from 9.5 percent in April. All groups which contribute to the Food sub-index increased at a faster pace during the reporting period with the highest year-on-year rises recorded in the Fish, Potatoes, yams and Tubers and Meats groups.
All Items less Farm Produce, which is all other items in the inflation basket except food also recorded its fifth consecutive month of increase.
The pace of advances recorded by the “All Items less Farm Produce” or Core sub-index increased for the Fifth consecutive month in May. The Core Sub-index increased by 8.3 percent (year-on-year), 0.6 percentage points from 7.7 percent recorded in April, with the highest pressures observed in the Housing Water, Electricity, Gas and Other Fuels; Alcoholic Beverage, Tobacco and Kola; and Transportation divisions. The pace of increases continued to slow in the Communications division however.
The Central Bank Governor, Godwin Emefiele has dished out several monetary policy circulars in the past 6 months in response to dwindling oil prices, depreciation of the naira and the national elections. Unfortunately, one of his many policies was the depreciation of the naira which is perhaps the biggest driver of the inflation in the country.
With the naira depreciated, cost of goods are expected to sky rocket as importers adjust their input cost. The exchange rate was also a crucial factor in the subsidy payment debacle between the immediate past government and the oil marketers as they disagreed on what exchange rate subsidy payments will be based on.
The CBN Governor must be feeling the heat as an increase in inflation basically thumps its monetary policy actions. Prices of goods and services are only going to get more expensive. Banks will also respond in kind by jacking up interest rates to match the new reality.
The current government is still yet to make any major pronouncement on the economy and one should believe that they nevertheless watching events closely.