Connect with us
Gage

Macro-Economic News

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.

Published

on

parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

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.

Specta

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.

Coronation ads

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

5 Comments

5 Comments

  1. Yohanna Danjuma

    November 21, 2020 at 4:00 am

    “Central banks will often say that these price increases are not due to monetary policy but market forces. However, it is precisely monetary policy that strains market forces by pushing rates lower and money supply higher. Monetary policy makes it harder for the least privileged to live day by day and increasingly difficult for the middle class to save and purchase assets that rise due to expansionary monetary policies, such as houses and bonds.

    Inflation may not show up on news headlines, but consumers feel it. The general public has seen a constant increase in the price of education, healthcare, insurance, and utility services in a period where central banks felt obliged to “combat deflation”…a deflationary risk that no consumer has seen, least of all the lower and middle classes.

    Inflation is not a social policy. It disproportionately benefits the first recipient of newly created money, government and asset-heavy sectors, and harms the purchasing power of salaries and savings of the low and middle class. “Expansionary” monetary policy is a massive transfer of wealth from savers to borrowers. Furthermore, these evident negative side effects are not solved by the so-called quantitative easing for the people. A bad monetary policy is not solved by a worse one. Injecting liquidity directly to finance government entitlement programs and spending is the recipe for stagnation and poverty. It is not a coincidence that those that have implemented the recommendations of modern monetary policy wholeheartedly, Argentina, Turkey, Iran, Venezuela, and others, have seen increases in poverty, weaker growth, worse real wages and destruction of the currency”—–Daniel Lacalle, PhD, economist, fund manager,  author.

    “Inflation……is daylight robbery”.
    Daniel Lacalle.

  2. Usaini Yahaya

    November 27, 2020 at 6:54 pm

    Please I am abuness man so I have lack of money so please help I come from kano

    • Anonymous

      November 27, 2020 at 7:00 pm

      And I can give you all my address please see my number 07064673572 If you can help me please call me

    • Usaini Yahay

      November 27, 2020 at 7:02 pm

      And I can give you all my address please see my number 07064673572 If you can help me please call me

  3. Usaini Yahaya

    November 27, 2020 at 7:04 pm

    Please I am abuness man so I have lack of money so please help I come from kano
    I can give you all my address if you need call me 07064673572

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Macro-Economic News

Nigeria’s inflation rate hits 15.75% in December 2020, highest in 3 years

This is 0.86% points higher than the rate of 14.89% recorded in November 2020.

Published

on

Despite billions on agriculture, food inflation up by 108% since 2015.

Nigeria’s inflation rate increased by 15.75% (year-on-year) in December 2020, the highest rate recorded in 3 years.

According to the latest Consumer Price Index report, released by the National Bureau of Statistics (NBS), the latest figure is 0.86% points higher than the rate of 14.89% recorded in November 2020.

On a month-on-month basis, the index increased by 1.61% in December 2020. This is 0.01% point higher than the rate recorded in November 2020 (1.60%).

READ: Inflation rate up 207% since 2009 as bad economic policies ravages naira.

Food inflation

Specta

The closely watched index rose sharply by 19.56% in December compared to 18.3% recorded in the previous month.

  • On a month-on-month basis, the food sub-index increased by 2.05% in December 2020, up by 0.01% point from 2.04% recorded in November 2020.
  • The rise in the food index was caused by increases recorded in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats.

READ: Hope rises for employment in December 2020 and January 2021 – CBN survey Report 

Core inflation

The “All items less farm produce’‘ or Core inflation, which excludes the prices of volatile agricultural produce stood at 11.37% in December 2020, up by 0.32% when compared with 11.05% recorded in November 2020.

Coronation ads
  • Also, on a month-on-month basis, the core sub-index increased by 1.10% in December 2020. This was up by 0.39% when compared with 0.71% recorded in November 2020.
  • The highest increases were recorded in prices of passenger transport by air, medical services, hospital services, shoes and other footwear, passenger transport by road, miscellaneous services relating to dwellings, hairdressing salons and personal grooming establishments, and repair of furniture.
  • Others include vehicle spare parts, pharmaceutical products, motor cars, maintenance and repair of personal transport equipment, paramedical services, motorcycle, dental services, and bicycles.

READ: Cost of data subscription reduces by over 50% in 2020

Worst hit states

  • In the month of December 2020, Bauchi State recorded the highest inflation rate at 19.85%, closely followed by Kogi State with an inflation rate of 18.4%
  • Others include Edo (18.1%), Zamfara (17.9%), and Sokoto (17.6%)
  • In terms of food inflation, Edo State also recorded the highest rise in inflation rate with 24.1%, followed by Kogi (23.16%), Sokoto (22.2%); while Kwara and Zamfara State recorded food inflation of 22.1% and 21.7% respectively.

READ: Nigeria’s inflation expected to maintain double digit in the next one year

Coronation ads

Meanwhile, the urban inflation rate increased by 16.33% (year-on-year) in December 2020 from 15.47% recorded in November 2020, while the rural inflation rate increased by 15.20% compared to 14.33% recorded in November 2020.

Stanbic IBTC

What this means

The rise in the consumer price index indicates that consumers spent more in the month of December compared to the previous month.

Jaiz bank ads
  • This implies that the purchasing power of Nigerians is continually eroding.
  • Nigerians could be faced with new worries if the second wave of the covid-19 pandemic leads to a second round of lockdown in the country.
  • The significant increase could, however, be attributed to the Christmas and New year festivities in the month of December.

Continue Reading

Macro-Economic News

Nigeria’s total public debt rises to N32.2 trillion ($84.57 billion) as at September 2020.

The total public debt (External and Domestic) incurred by Nigeria stood at N32.22 trillion ($84.57 billion) as of September 2020.

Published

on

How to avoid debt despite economic challenges

Nigeria’s total public debt stock as of September 2020, increased by over N6 trillion in just one year. This is according to the Nigerian Domestic and Foreign Debt report, recently released by the National Bureau of Statistics (NBS).

The total public debt (External and Domestic) incurred by Nigeria stood at N32.22 trillion ($84.57 billion) as of September 2020, which represents an additional N6.01 trillion when compared to N26.21 trillion recorded as of the corresponding period of 2019.

READ: Nigeria total public debt hits N31 trillion as debt service gulp over N1.2 trillion in H1 2020 

The breakdown shows that external debts accounted for 37.82% (N12.19 trillion) of the total debt stock, while domestic debts at N20.04 trillion represented 62.18% of the total.

Breakdown

  • Further disaggregation of Nigeria’s foreign debt showed that $16.74bn of the debt was multilateral.
  • Also, $502.38m was bilateral (AFD) and another $3.26bn bilateral from the Exim Bank of China, JICA, India, and
    KFW while $11.17bn was commercial which are Eurobonds and Diaspora Bonds.
  • Total external debt grew by $5.04 billion (N3.9 trillion) within the period, indicating an increase of 18.72%.
  • Total domestic debt on the other hand declined by $5.86 billion. However, it represents an increase in Naira value of N2.09 trillion, largely due to multiple devaluations of the currency during the period.

READ: Growing concern for Nigeria’s ballooning debt profile

Specta

A cursory look at the breakdown of the domestic debts show that 73.53% (N11.65 trillion) were in form of Federal Government bonds, 17.17% (N2.72 trillion) in Treasury bills, followed by Promissory Notes accounting for 6.13% (N971.9 billion) of the total federal government domestic debts.

Others include; FGN Sukuk (N362.6 billion), Treasury Bonds (N100.9 billion), Green bond (N25.7 billion), and Savings bond (N12.6 billion).

READ: Debt burden of the least developed nations rises to $744 billion – World Bank

More loans to be expected

Coronation ads

On the 31st of December 2020, President Buhari signed the 2021 appropriation bill of N13.59 trillion into law, which 25.7% higher than the revised 2020 budget of  N10.8 trillion. However, the budget comes with a deficit of N5.6 trillion, which is expected to be financed mainly through borrowings both externally and domestically.

READ: Global Economy to grow by 4% in 2021 – World Bank

According to the minister of Finance, Budget, and National Planning, Dr. Zainab Ahmed, in a budget presentation on Tuesday, N2.34 trillion will be sourced each from domestic and foreign sources respectively, N709.69 billion from Multilateral/bilateral loan drawdowns, and N205.15 billion from privatisation proceeds.

READ: Analysis: Nigeria needs an austerity diet

Coronation ads

Recall that Nairametrics reported in December that, the World Bank finally approved a $1.5 billion loan request made by Nigeria as budget support in order to cushion the impact of the covid-19 pandemic on the country’s revenue.

Stanbic IBTC

It is also worth noting that the federal government will be tapping into funds in unclaimed funds and dormant accounts.

Jaiz bank ads
Continue Reading

Macro-Economic News

PMI: Nigeria’s manufacturing sector contracts in December

The manufacturing sector relapsed in December from 50.2 index points recorded in the month of November 2020.

Published

on

Manufacturing sector in Nigeria and the reality of a "new normal"

The Manufacturing Purchasing Managers’ Index (PMI), for the month of December, witnessed a contraction, as it stood at 49.6 index points. This was disclosed in the PMI report, recently released by the Central Bank of Nigeria (CBN).

According to the report, the manufacturing sector relapsed from 50.2 index points recorded in the month of November 2020. It however, gained marginally compared to 49.4 index points recorded in October 2020.

READ: CBN report projects greater employment prospects in 2021

The report also disclosed that out of the 14 surveyed subsectors, 4 subsectors reported expansion (above 50% threshold) in the review month in the following order:

  • Transportation equipment
  • Nonmetallic mineral products
  • Paper products
  • Food, beverage & tobacco products.

READ: Frantic CBN allows diaspora remittances to be withdrawn in dollars and sold anywhere including black market

Specta

However, textile, apparel, leather, and footwear subsector remained stationary while the remaining 9 subsectors reported contractions in the following order:

  • Primary metal,
  • Petroleum & coal products
  • Cement
  • Electrical equipment
  • Fabricated metal products
  • Printing & related support activities
  • Plastics & rubber products
  • Chemical & pharmaceutical products and
  • Furniture & related products

For context read: Nigeria’s manufacturing sector contracts for 4th consecutive month – CBN

Non-manufacturing PMI

PMI for the non-manufacturing sector stood at 45.7 points in the month of December 2020, indicating contraction in Non-manufacturing PMI for the ninth consecutive months.

Coronation ads

Of the 17 surveyed sub-sectors, 5 subsectors reported growth in the following order:

  • Arts, Entertainment & Recreation
  • Water supply, sewage & waste management
  • Electricity, gas, steam & air conditioning supply
  • Educational services and Professional
  • Scientific & technical services

READ: These industries appear to have returned to pre-pandemic levels

While twelve subsectors reported declines in the following order: Management of companies; Utilities; Transportation & warehousing; Real estate rental & leasing; Construction; Finance & insurance; Agriculture; Wholesale/Retail trade; Information & communication; Repair, Maintenance/Washing Of Motor Vehicles; Health care & social assistance and Accommodation & food services.

What you need to know

  • In December 2020, suppliers’ delivery time was faster, new orders and production level increased while employment level and raw materials inventories contracted.
  • The business activity index for the non-manufacturing sector contracted at 46.9 points from the expansionary level recorded in the month of November 2020.
  • The employment level Index for the non-manufacturing sector in the month of December 2020 stood at 45.1 points, indicating contraction in employment level for the ninth consecutive months.

READ: COVID-19: CACOVID spent N43.27 billion to support 3 key priorities – CBN

Coronation ads

What this means

PMI is a survey that is conducted by the Statistics Department of the Central Bank of Nigeria and shows the changes in the level of business activities in the current month compared with the preceding month.

Stanbic IBTC
  • For each of the indicators measured, this report shows the diffusion index of the responses, which is computed as the percentage of responses with positive change plus half of the percentage of those reporting no change, except for supplier delivery time, which is computed as the percentage of responses with negative change plus half of the percentage of those reporting no change.
  • A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding. 50 points indicate that there is no change, while a PMI below 50 points indicates that it is generally contracting.
  • A contraction in manufacturing activities means that the sector is yet to recover from the covid induced downturn which crippled the manufacturing activities for 6 consecutive months before recording slight expansion in the previous month.

Continue Reading
Advertisement




Advertisement