Nigeria’s consumer price index, which measures inflation, dropped to 11.22% in June 2019. This was revealed in the latest inflation report released by the National Bureau of Statistics (NBS).
According to the NBS report, inflation dropped by 0.18% points year-on-year, lower than the 11.40% rate recorded in May 2019.
The Food Index: The NBS report shows that in June, Food inflation slowed down at 13.56% from 13.79% in the previous month. The average annual rate of change of the Food sub-index over the previous twelve-month average was 13.42%, which was 0.05% points higher than the average annual rate of change recorded in May 2019.
While explaining the reason for the rise in the food index, it was stated that this was caused by increases in prices of Bread and Cereals, Meat, Fats and Oils, Potatoes, Yam and other tubers, Fish, Vegetables, and Fruits.
All food items: Nigeria’s core inflation, which proxies food items, stood at 8.8% in June 2019. On a month-on-month basis, the core inflation sub-index increased by 0.85% in June 2019. NBS revealed that the highest price increases were recorded in items such as Medical and hospital services, Cleaning, Repair and hire of clothing, Repair and hire of footwear, and Repair of household appliances.
Other items listed by the Bureau include Actual and imputed rentals for housing, Major household appliances (whether electronic or not) and tobacco.
Rural and Urban Inflation: In June, urban inflation dropped to 11.61% from 11.76% on a year-on-year basis, while the rural inflation rate increased by 10.87%. On a month-on-month basis, the urban index rose by 1.10% in June 2019, up by 0.05point.
The rural index also rose by 1.05% in June 2019, up by 0.02 points from the rate recorded in May 2019. On the other hand, the urban index rose by 1.10%, up by 0.05, while the rural index also rose by 1.05%.
Inflation drops to 11 month low: The latest inflation data shows that Nigeria’s inflation dropped to almost a year low in June. Basically, Nigeria’s inflation has been fluctuating in recent months. This means inflation grew slowest in almost a year.
- In December 2018, inflation hits a high of 11.44%
- After over three months of decline between January and March 2019, inflation rose again in April due to increases in prices of Medical services, Hospital services, Dental Services, Tobacco, Vehicle spare parts and Major household appliances.
- Meanwhile, the latest report shows that the inflation rate dropped to an 11-month low.
How the economy may react: As inflation inches up to almost a year low, it implies that all affected items captured by the Bureau witnessed a slow rise in their prices. It is important to note that a slowdown in food price spikes tend to be more temporal, and is mostly triggered by a surplus supply of goods in relation to demand.
The latest slow rise in inflation may affect key economic agents in the economy in the following ways:
- To firms, this may mean improvement in business activities for them, as companies’ inventories of goods affected may decline through an increase in sales, which means an improvement in revenue generated.
- To individuals, this means an improvement in the purchasing power of the consumers to buy goods and services, without necessarily witnessing large price differences within a period.
- Lastly, for policymakers like the Central Bank of Nigeria, the latest drop in inflation rate falls in line with the Central Bank’s inflation targetting policy, aimed at driving inflation to a single digit. This suggests that the CBN may continue its monetary tightening policy to further drive down inflation.