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.
Nigerian states generate N1.31 trillion IGR in 2020 as Lagos dwarfs others
The 36 states and the Federal Capital, generated a sum of N1.31 trillion as Internally generated revenue (IGR) in 2020
The 36 states and the Federal Capital Territory generated a sum of N1.31 trillion as Internally generated revenue (IGR) in 2020. This was contained in the state IGR report, which was recently released by the National Bureau of Statistics (NBS).
According to the report, the states’ IGR declined by 1.93% from N1.33 trillion, recorded in the previous year to N1.31 trillion in 2020. It however increased by 11.7% compared to N1.69 trillion recorded in 2018.
The decline may be due to the effects of the covid-19 pandemic on the various states of the federation, as they were forced to implement lockdown protocols to curb the spread of the disease in the country.
- States generated N1.09 trillion from taxes in the year 2020, accounting for 83.3% of the total IGR received in the year.
- Tax revenue also declined, when compared to N1.11 trillion collected in the previous year. This represents a 2.25% decline year-on-year.
- Lagos State recorded the highest Internally Generated Revenue of N418.99 billion, accounting for 32.1% of the total and closely followed by Rivers State with N117.19 billion.
- Others with the highest IGR in 2020 include Abuja (N92.06 billion), Delta (N59.73 billion), and Kaduna (N50.75 billion).
- Kebbi State recorded the highest year-on-year growth of 87.02%, closely followed by Ebonyi at 87.3%. Oyo State grew its IGR by 42.23%, Borno (41.63%), while Katsina grew by 34.16%.
- On the flip side, Benue State recorded the highest year-on-year decline of 41.38%, followed by Sokoto State, which dipped by 37.93%, Kwara (36.03%), Jigawa (32.95%), and Ogun State (N28.44%).
A cursory look at the data shows that the States recorded the highest quarterly IGR in the first quarter of the year, before the covid-induced lockdown in March 2020. It however dipped significantly by 25.53% to stand at N269.88 billion in Q2 2020.
States generated a sum of N338.57 billion in Q3 2020 and then recorded a marginal decline in Q4 2020 to stand at N335.25 billion.
Lagos dwarfed others
Lagos State recorded the highest internally generated revenue in 2020, having made N418.99 billion, accounting for 32.08% of the total states’ IGR recorded in the period under review.
- It is no surprise that Lagos State makes this much revenue as it is regarded as the commercial hub of Nigeria.
- According to the data from NBS, Rivers State is a distant second on the list with N117.19 billion as IGR, representing 8.97% of the total, while the Federal Capital Territory, Abuja followed closely with N92.06 billion, representing 7.05% of the total recorded in the year.
- Others on the list include Delta State (N59.73 billion), Kaduna State (N50.77 billion), Ogun (N50.75 billion), and Oyo State with N38.04 billion.
Kebbi, Ebonyi boosted revenue by over 80%
Kebbi State and Ebonyi State grew their internally generated revenue by over 80%, with Kebbi recording 87.02% growth in IGR to stand top on the list of states with the highest growth rate; followed closely by Ebonyi State with 82.3% growth in IGR to stand at N13.59 billion.
- Oyo State grew its IGR by 42.23%, Borno (41.63%), Katsina (34.16%), and Gombe (25.5%).
- Meanwhile, 18 out of the 37 states of the federation recorded a decline in IGR in 2020, a list led by Benue State, having dipped its annual IGR by 41.38%, followed by Sokoto with 37.93%, Kwara (36.03%), Jigawa (32.95%), and Ogun State with a decline of 25.44%.
What this means
- The decline in states’ internal revenue was caused by the pandemic which struck earlier in 2020, disrupting economic activities in the country.
- Nigeria recorded a recession in the third quarter of 2020, after a consecutive economic contraction, recorded in Q2 and Q3 2020.
- It, however, recovered from the recession in the fourth quarter. It is therefore hoped that as economic activities resume fully in the country, the states will be able to boost their revenue in the short-to-medium term.
Nigeria’s inflation rate surges to 18.17% in March 2021
Nigeria’s inflation rate for the month of March 2020, rose to 18.17% from 17.33% recorded in February 2021.
Nigeria’s inflation rate for the month of March 2020, rose to 18.17% from 17.33% recorded in February 2021. This represents 0.82% points higher than the February figures.
This is according to the Consumer Price Index report, recently released by the National Bureau of Statistics (NBS).
On a month-on-month basis, the Headline index increased by 1.56% in March 2021, this is 0.02% points higher than the rate recorded in February 2021 (1.54 percent).
Food inflation, a closely watched index spiked to 22.95% from 21.79% recorded in the previous month.
- On a month-on-month basis, the food sub-index increased by 1.9% in March 2021, up by 0.01% points from 1.89% recorded in February 2021.
- The rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, yam, and other tubers, Meat, Vegetables, Fish, Oils and fats, and fruits.
- Also, the average annual rate of change of the Food sub-index for the twelve-month period ending March 2021 over the previous twelve-month average was 17.93%, representing 0.68% points from the average annual rate of change recorded in February 2021 (17.25%).
The ”All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce rose to 12.67% in March 2021, up by 0.29% when compared with 12.38% recorded in February 2021.
- On a month-on-month basis, the core sub-index increased by 1.06% in March 2021. This was down by 0.15% when compared with 1.21% recorded in February 2021.
- The average 12-month annual rate of change of the index was 10.01% for the twelve-month period ending March 2021; this is 0.76 percent points lower than 10.77% recorded in February 2021.
- The highest increases were recorded in prices of Passenger transport by air, Medical services,
Miscellaneous services relating to the dwelling, Passenger transport by road, Hospital services, Passenger transport by road.
- Others include; Pharmaceutical products, Paramedical services, Vehicle spare parts, Dental services, Motor cars, Maintenance and repair of personal transport equipment, and Hairdressing salons and personal grooming establishment.
Meanwhile, the urban inflation rate rose to 18.76% (year-on-year) in March 2021 from 17.92%
recorded in February 2021, while the rural inflation rate jumped to 17.6% in March 2021 from 16.77% in February 2021.
State inflation rate
- In March 2021, all items inflation on year on year basis was highest in Kogi (24.51%), Bauchi (22.24%), and Sokoto (20.70%), while Imo (16.08%), Kwara (15.34%), and Cross River (14.45%) recorded the slowest rise in headline Year on Year inflation.
- In terms of food inflation, on a year on year basis was highest in Kogi (29.71%), Sokoto (27.02%), and Ebonyi (26.59%), while Abuja (20.10%), Kebbi (19.98%), and Bauchi (18.61%) recorded the slowest rise .in year on year inflation.
What this means
- The galloping nature of Nigeria’s inflation is an indication of the dwindling purchasing power of Nigerians.
- This implies that Nigerians spent more on purchasing goods and services in the month of March, compared to February.
- The last time Nigeria recorded an inflation rate higher than 18.17%, was in January 2017 when headline inflation stood at 18.72%.
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