Nigeria’s inflation rate rose year on year from 11.44% as at the end of 2018 to 11.98% by December 2019. This was disclosed in the latest inflation report released by the National Bureau of Statistics (NBS).
According to the NBS report, month on month, inflation rose by 11.98% in December, higher than the rate (11.85%) recorded in November 2019 and 11.61% in October. The inflation rate in Nigeria rose for the 4th consecutive month as the spiral effect of border closure continues to drag on the economy.
Food inflation, a closely watched component of the inflation index, rose by 14.67% in December 2019 compared to 14.48% recorded in November 2019. According to the NBS, the rise in the food index was caused by increases in prices of Bread and cereals, Meat, Fish, Oils and fats, Potatoes, yam and other tubers.
On a month-on-month basis, the food sub-index rose by 0.97% in December 2019, down by 0.28% points from 1.25% recorded in November 2019. The average annual rate of change of the Food sub-index for the twelve-month period ending December 2019 was 13.74% from November 2019 (13.65%).
On the other hand, Core inflation (All items less farm produce), which excludes the prices of volatile agricultural produce also rose 9.33% in December 2019, up by 0.34% when compared with 8.99% recorded in November 2019.
On a month-on-month basis, the core sub-index increased by 0.81% in December 2019. This was up by 0.02% when compared with 0.79% recorded in November 2019.
Also, the average 12-month annual rate of change of the index was 9.15% for the twelve-month period ending December 2019; this is 0.04 percent points lower than 9.19 percent recorded in November 2019.
Rural and Urban Inflation
Similarly, the urban inflation rate increased by 12.62% (year-on-year) in December 2019 from 12.47% recorded in November 2019, while the rural inflation rate increased by 11.41% in December 2019 from 11.30% in November 2019.
On a month-on-month basis, the urban index rose by 0.90% in December 2019, down from 1.07 percent recorded in the previous month, while the rural index also rose by 0.82% in December 2019, down from 0.98 recorded in November 2019.
Inflation spikes on border closure and demand pressure
According to the Bureau, core inflation was triggered by increases in prices of Hospital services, Hairdressing salons and personal grooming establishment, Garments, Repair and hire of footwear, Vehicle spare parts, Passenger transport by air, Shoes and other footwear, Appliances, articles and products for personal care, Clothing materials, other articles of clothing and clothing accessories and Cleaning, Repair and hire of clothing.
- Meanwhile, the rise in December may not come as a surprise as Nigerians continue to grapple with the effects of the border closure.
- Also, the surge in the demand for household items during the Christmas festivity must have piled up pressures on prices. Towards the year-end, Nigerians typically spend on household items such as food, fashion and gift items.
- Nairametrics had earlier reported that an up thick in inflation is still expected through 2019 on the backdrop of border closure and seasonality.
- Meanwhile, the latest increase in the inflation rate means the purchasing power of consumers and investors’ returns continue to worsen in the country.
- Most investors aim to increase their long-term purchasing power. However, Inflation puts this goal at risk because returns on investment must first keep up with the rate of inflation in order to increase real purchasing power.
- For instance, the rate of interest on most fixed income securities remains the same until maturity, hence, the purchasing power of the interest payments declines as inflation rises.