Nigeria’s inflation rate rose further in June 2020 to 12.56% (year-on-year), 0.16% points higher than the rate recorded in May 2020 (12.4%). This is according to the latest CPI report, released by the Nigerian Bureau of Statistics.
The report also showed that composite food index rose to 15.18% compared to 15.04% recorded in May 2020 while Core inflation, which excludes the prices of volatile agricultural produce that stood at 10.13% in June 2020 compared to 10.12% recorded in May 2020.
The composite food index stood at 15.18%, 0.14% points higher compared to 15.04% recorded in May 2020. Also, On month-on-month basis, the food sub-index increased by 1.48% in June 2020, up by 0.06% points from 1.42% recorded in May 2020.
This rise in the food index was caused by increases in prices of Bread and Cereals, Potatoes, Yam and other tubers, Fruits, Oils and Fats, Meat, Fish and Vegetables.
The ”All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural
produce stood at 10.13% in June 2020, up by 0.01% when compared with 10.12% recorded in May 2020.
On month-on-month basis, the core sub-index increased by 0.86% in June 2020. This was down by 0.02% when compared with 0.88% increase recorded in May 2020.
Inflation drivers: The highest increases were recorded in prices of Medical services, Hospital services, Passenger transport by road, Pharmaceutical products, Motor cars, Paramedical services, Maintenance and repair of personal transport equipment, Bicycles, Motor cycles, Vehicle spare parts and Other services in respect of personal transport equipment.
Worst hit states
In June 2020, all items inflation on year on year basis was highest in Bauchi (15.02%) followed by Sokoto state (14.88% rate), Ebonyi (14.6%) others include Plateau (14.49%) and Taraba state (13.95%).
On the other hand, Kwara state (10.03%) recorded the least all items inflation rate (year-on-year) followed by Lagos (10.78%). Others on the list include; Cross River (10.95%), Abuja (11.02%) and Borno (11.11%).
In terms of food inflation on a year on year basis, Sokoto state (17.88%) recorded the highest followed by Plateau (17.04%) and Abuja (16.82%), while Bauchi (12.86%), Ogun (13.18%), and Lagos (13.46%) recorded the slowest rise.
What this latest inflation rate means is that the purchasing power of consumers has further worsened and their ability to afford the same quantity of goods or services has reduced significantly.
No more N100 a plate meal in Nigeria
Food items across markets have experienced a spike in prices, making it impossible for one to find a decent meal for N100 today even in local outlets.
Gone are the days when an average Nigerian could purchase a meal with N100 and be filled to the brim. Even in Lagos, where foodstuffs are generally perceived to be expensive, a hungry Nigerian with just N100 could buy a loaf of ‘Agege’ bread for N60, beans for N30, and two sachets of pure water at N5 each; or White rice for N50, beans N30, spaghetti N10, and 2 pure water.
Similarly, with N100, an average Nigerian could purchase 1 wrap of “amala” for N50 and 2 slices of meat at N20 each with 2 pure water, while some other person could prefer to buy “fufu” in place of “amala” and still be filled.
However, prices of food items are known to be downward sticky in Nigeria, as food items across diverse food classes have experienced price increases in recent times. Of all items, staple food items are the most affected, especially the prices of rice, garri, yam, potato, cassava, and yam flour, to the prices of relatively ostentatious items like semovita, semolina, or poundo yam.
Even the market prices of spaghetti and indomie, which are considered close substitutes for rice, have experienced major spike in recent times. By taking an investigative stance, one would realize that Golden penny pasta (spaghetti) which sold for between N120 – N150 a year ago, ow sells for between N230 – N250 a piece, marking about a 66.67% increase in 12 months.
Similarly, egg, a pocket-friendly and close substitute for fish, meat, chicken, and turkey, is not so pocket-friendly anymore, with a price increase from N25 a year ago to N50 as of today – a 100% increase.
In line with the recent development, coupled with the widespread economic vulnerabilities in the nation, it is obvious that the cost of cooking a meal in Nigeria today is twice as expensive as it was a year ago. As the price of cooking ingredients like tomato paste has increased by more than 200% this year alone. The price of onion, which is a widely eaten vegetable in the country, has also increased.
Consequently, the cost of buying cooked food from ‘Mama Put’, food restaurants, and other outlets has also gone skyrocketed — it is impossible to get a satisfying meal without spending as much as N300 or more in the process, depending on the type of outlet you patronise. If a person were to spend on meals, an average of N300 twice a day for 31 days, it therefore indicates that an average Nigerian spends at least N18,600 on feeding in a month considering that many Nigerians still earn below the minimum wage of N30,000.
What they are saying
A food vendor in Abule Egba, known by her street name, Iya Sodiq, said that the cost of items she uses in cooking has gone up recently, and the only option she had was to increase the price she charges her customers to compensate for the recent increase. She disclosed that most times when asked to sell a fixed amount of food by a customer, the quantity she sells now is considerably lower than what she would have sold at the same amount earlier this year.
She stressed that even the smallest bread she sells in her shop currently goes for nothing less than N100.
“The prices of everything in the market is now high. Even the customers are complaining that my food is now small, but they don’t understand that I am not even making many gains anymore because food items are now so expensive in the market,” Iya Sodiq said.
In a conversation with another food vendor at Ikeja, by the name Mrs. Tobiloba, she highlighted that the cost of preparing a pot of soup has spiked significantly, given that the price of tomato paste, onions, pepper, seasoning, fish, meat, and even rice has gone up relative to last year, which meant her customers have to spend above N100 to quench their hunger.
She said, “Onions, pepper, tomatoes, rice, fish, meat and everything you need to prepare soup or stew have increased in prices in the market. If I sell in the quantity I was selling before, I will definitely run at a loss.”
What this means
The persistent increase in the prices of food items has put downward pressures on the real value of money and also the real income of Nigerians. With food inflation rate moving towards the 2017 level of 17.38%, the purchasing power of Nigerians has never been this constrained, with nothing to compensate for the recent increase in the prices of food items, despite the increase in the national minimum wage.
What you should know
After a careful comparison of the composite food index between September 2015 and September 2020, Nairametrics reported last month that food inflation increased by 110.5%, this shows that the purchasing power of Nigerians is constrained, as real income has reduced significantly, despite the 66.7% increase in the National minimum wage from N18,000 to N30,000.
Article jointly written by Samuel Oyekanmi and Omokolade Ajayi
Central Bank says monetary policy not to blame for rising food cost
The CBN has insisted that rising food inflation can not be attributed to its monetary policy but to supply-related issues.
The Central Bank of Nigeria has once again blamed the rising food inflation on supply-related issues, shifting the blame away from its monetary policy.
The latest data from the National Bureau of Statistics (NBS) reveals that the inflation rate for the month of October rose to 14.23% year on year. Food inflation, a major component of Nigeria’s inflation rate, rose by 17.38% year on year, underpinning the high cost of food suffered by millions of Nigerians.
Reasons for high food inflation
The central bank in its monetary policy committee meeting held in September identified the rising food inflation and blamed it on factors that are beyond its control. The latest MPC release contains the personal statements of the members.
The increase in headline inflation was largely driven by the persistent increase in the food component, which rose to 16.00% in August 2020, from 15.48% in July 2020. The core component also rose to 10.52% in August from 10.10 per cent in July 2020.
These upticks were driven primarily by legacy structural factors, such as the inadequate state of critical infrastructure and broad-based security challenges across the country, which dampened production activities. Other factors include the disruptions to supply chains, following restrictions to movements to curb the spread of the pandemic; adverse weather conditions, which resulted in the flooding of farmlands; as well as the inflation pass-through to domestic prices, following the depreciation in the exchange rate.
The recent increase in energy cost is also expected to further impact the domestic price level in the short-term.
What this means: By dumping inflation targeting from the demand side, the CBN is simply betting that spending money on stimulus programs will pay off down the road, as cheaper long-term credit will reduce the cost of goods and services and will eventually reflect in the lower inflation rate.
- The CBN did not state where it sees the inflation rate and when it will drop to its new target by relying on supply-side management as a strategy.
- The CBN claims it has spent about N3.5 trillion on several stimulus programs since Covid-19 broke in the first quarter of the year. However, the inflation rate continues to gallop, eroding the purchasing power of ordinary Nigerians.
- The downside of this strategy is that there is very little impetus for foreign investors to purchase CBN securities at very low-interest rates.
- This shuts the door to the reliance of foreign portfolio inflows to shore up dollar reserves, leaving us with investors who may want to return to the stock market.
What to expect: If oil prices fail to pick up and foreign investor inflow is not forthcoming, there will likely be heavy pressure on the CBN, effectively worsening things.
Nigerians paid less to refill cooking gas in October – NBS report
The latest report released by the NBS has shown that the average price for refilling a cylinder of cooking Gas decreased in October.
The Liquefied Petroleum Gas (Cooking Gas) report recently released by the National Bureau of Statistics (NBS) shows that the average price for refilling a 5kg cylinder of cooking gas decreased by 1.06% to N1,953.71 in October, from N1974.67 in September 2020.
This is according to the latest NBS Liquefied Petroleum Gas (Cooking Gas) Price Watch report, for the month of October 2020, which was released today the October 17.
The report was conducted by collating prices of Liquefied Petroleum Gas (Cooking Gas) across all the 774 local governments across the nation with over 10,000 respondents and locations.
Also, the average price for refilling a 12.5kg cylinder of Liquefied Petroleum Gas (Cooking Gas) also decreased by -0.78% month-on-month and by -0.64% year-on-year to N4,078.65 in October 2020 from N4,110.92 in September 2020.
- States with the highest average price for the refilling of a 5kg cylinder for LPG (Cooking Gas) were Bauchi (N2,487.83), Borno (N2,392.77), and Adamawa (N2,367.80).
- States with the lowest average price for the refilling of a 5kg cylinder for LPG (Cooking Gas) were Enugu (N1,611.11), Jigawa (N1,678.57), and Imo (N1,693.75).
- States with the highest average price for the refilling of a 12.5kg cylinder for Liquefied Petroleum Gas (Cooking Gas) were Cross River (N4,598.50), Akwa Ibom (N4,562.50), and Anambra (N4,503.14).
- States with the lowest average price for the refilling of a 12.5kg cylinder for LPG (Cooking Gas) were Kano (N3,560.00), Oyo (N3,638.46), and Zamfara (N3,700.00).
A careful review of the report revealed that the decrease in the average price Nigerians paid to refill cooking gas in October is attributable to the fall in the purchasing power of Nigerians, given the widespread economic vulnerabilities in the nation and the civil unrest in October which impacted businesses negatively.
This development led to a drawback in the use of gas cookers at all front, as some Nigerians moved to cheaper alternatives like kerosene cookers and charcoal to meet their food needs.
It is important to note that this changed economic expectations and reality triggered the average price per litre Nigerians spent on a close substitute (Kerosene) by 1.42% month-on-month and by 8.69% year-on-year in October 2020.
The Kerosene price watch by NBS for the month of October revealed that average price per litre paid by consumers for National Household Kerosene increased by 1.42% month-on-month and by 8.69% year-on-year to N352.93 in October 2020 from N347.98 in September 2020.