The National Bureau of Statistics on Wednesday reported that Nigeria’s inflation rate for the month of October was 15.91% making it the 9th consecutive month the country has recorded a drop in inflation rate. The latest inflation rate data compares to the 15.98% reported in September 2017
On a month on month basis, the Headline index increased by 0.76 percent in October 2017, 0.02% points lower from the rate of 0.78% recorded in September. This also represents the 5th consecutive month on month contraction in headline inflation since May 2017. A look at this data suggest a slow but steady moderation in prices of goods and services this year, compared to 2016.
Despite this good news, analysts still opine an inflation rate in the high double digits is still inimical to economic growth in the country. This is further disconcerting when you consider how sluggish the recent drop in inflation rate has been this year.
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For example, of the 41 months where inflation rate has dropped year on year since 2010, 2017 had 5 of the slowest drops from the bottom 10. Also, the months July, August, September and October were represented out of the 5, leaving April 2017 as the other slowest year on year drop.
This perhaps explains some of the frustrations being expressed by analysts who point to the negative effect this is having on economic growth. A reduction in inflation rate is always welcome, however when it is crawling (as it currently is) it means Nigeria’ chances of attaining a robust Real GDP growth will only get harder, at least in the short term. This of course has ripple effects on interest rates, government borrowing, foreign investments and purchasing power.
Even though the government will point to the tagline “9th consecutive monthly drop”, a very slow drop in an inflation rate from double digits is not desirable for the Nigerian economy of today. If Nigeria’s inflation rate continues to drop at the average of 0.31% monthly, as we have seen this year, it will take another 19 months for Nigeria to record a single digit inflation rate.
The last time Nigeria went from double digit inflation rate to single digit, it took about 16 months. This was before January 2013. Before then it was 18 months and this was July 2011. We have now done 21 months in double digit inflation rate (last single digit inflation rate was in January 2016) and look set to rack up more months. This surely, is not a good sign for this government.
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