The National Bureau of Statistics has released its 2016 June Consumer Price Index confirming that inflation rate rose to 16.5% for the month in view. This is the highest inflation rate in Nigeria since March 2005 according to our data.
According to the NBS, the inflation rate increased by 16.5% (year-on-year), 0.9% points higher from rates recorded in May (15.6%).
Nairametrics had last week predicted an inflation rate above 16% following the feedback we obtained prices of goods and services in select markets in Lagos.
What is to blame?
The NBS blames the increase in prices of Electricity, Liquid Fuel (kerosene), Furniture and Furnishings, Passenger Transport by Road, and Fuels and Lubricants for Personal Transport Equipment for the high inflation rate. Also to blame was the increase in the prices of imported items particularly food.
“Year on year, energy prices, imported items and related products continue to be persistent drivers of the Core sub-index. The Core index increased by 16.2% in June, up by approximately 1.2% points from rates recorded in May (15.1%). During the month, the highest increases were seen in the Electricity, Liquid Fuel (kerosene), Furniture and Furnishings, Passenger Transport by Road, and Fuels and Lubricants for Personal Transport Equipment.”
Despite this high inflation rate, the Bureau also noted that inflation rate on a month on month basis slowed. It rose on a month on month basis by 1.7% in June compared to 2.8% in May 2016.
How it affects you
Rising inflation rate portends dire consequences for ordinary Nigerians and small business owners. For starters, this data confirms officially that prices of goods and services are rising across board.
- A general increase in the Prices of goods and services means household items that are yet to fully reflect inflationary trends will soon go up. For example, Bakers may cite a higher inflation as a reason to increase the price of bread.
- Interest rates on consumer loans will likely be increased by your lenders. Banks also benchmark lending rate to inflation.
- The value of any cash deposited in the bank is now 16% less than what it was same period last year. This means your purchasing power has depreciated
- Businesses that sell goods or services that are not essential may see a huge drop in sales leading to loss of jobs.
- Your salary may no longer be a enough to cater for your expenses which could lead you towards racking up debts used to augment the shortfall.
- Input cost for the products that you sell will likely rise forcing you to either increase your selling price or absorb some losses to stay competitive.
- Weaker competitors will likely cave in to higher prices and may be forced to close shop. You might be a victim of this if you do not have a competitive advantage.
- Your employees will demand a higher salary and if they do not get it they may resort to pilfering or corrupt activities
- Interest rates on your loans will likely increase as banks will consider reflecting the higher inflation rate on their lending. Lending at a rate less than inflation means they earn negative interest rates. Also, lending at a rate slightly higher than inflation rate reduces their real rate of return exposing them to a loss of value.
Read this article to learn about how to beat inflation