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Macro-Economic News

Food inflation rate in Nigeria surges to highest in over 15 years

Nigeria’s food inflation rate surged to 21.79% in February 2021, which is the highest rate recorded in Nigeria since October 2005.

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Nigeria’s food inflation rate surged to 21.79% in February 2021, which is the highest rate recorded in Nigeria since October 2005—exactly 15 years and 4 months ago.

The February 2021 CPI and Inflation Report as released by the National Bureau of Statistics (NBS) revealed that the rise in the food index was caused by increases recorded in the prices of bread and cereals, potatoes, yams, and other tubers.

Also, the increase in the prices of meat, food products, fruits, oil, and fats, vegetables, and fish contributed to the recorded spike in the food inflation rate.

READ: Border closure, insecurity and other causes of high food inflation in Nigeria

READ: A summer of higher food prices, limited room for monetary policy

The persistent increase in inflationary pressure, especially food inflation, can be attributed to the closure of land borders in 2019 which was further affected by the outbreak of the covid-19 pandemic in 2020.

A cursory look at the historical data shows that Nigeria’s food inflation rate has witnessed persistent increase since September 2019, which was around the time President Muhammadu Buhari ordered the closure of land borders in the country. It is however, worth noting that the President ordered the reopening of the land borders in December 2020.

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READ: Naira gains at NAFEX window as external reserve plunges $1.1 billion in less than a month

What you should know

  • Nigeria experienced a recurrent negative food inflation rate in the year 2000, which led to the deflation of the headline inflation during the first quarter of the year. It however began to spike exponentially in 2001, reaching as high as 39.53% in September 2001.
  • In August 2019, the Federal Government announced the partial closure of its land borders against all illegal food importations and later in October 2019, halted all forms of trade via its land borders. This resulted in a steady increase in the food inflation rate.
  • While the border closure caused food prices to increase, the outbreak of the covid-19 pandemic in 2020 further contributed to the increased food inflation rate.
  • The covid-19 pandemic necessitated the Federal Government to declare a nationwide lockdown as a measure to curb the disease in the country. Also, the pandemic invariably caused the crash of oil prices and Nigeria’s export earnings.
  •  The fall in foreign earnings led to CBN’s devaluation of the naira twice in the year as it could no longer sustain the exchange rate at N306/$. The devaluation and depreciation increased cost for producers/suppliers which was subsequently transferred to customers, thereby increasing the cost of food items.

READ: Africa: Ghanaian inflation rate drops for the 3rd straight month to 10.1%

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The average annual rate of change of the Food sub-index for the twelve-month period ending February 2021 over the previous twelve-month average was 17.25%, 0.59% points from the average annual rate of change recorded in January 2021 (16.66%).

Notably, in February 2021, food inflation was highest in Kogi State (30.47%), Ebonyi (25.73%) and Sokoto (25.68%), while Gombe (19.32%), Bauchi (18.74%), and Akwa Ibom (18.70%) recorded the slowest rise in year on year inflation.

What this means

It is evident that Nigerians are spending more on food items despite low yields on investments and increased unemployment in the country. Recall that Nairametrics had reported that Nigeria’s unemployment rate rose to 33.3% as of Q4 2020, indicating an increase in spending and reduction in purchasing power.

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Fikayo is a first class graduate of economics with experience in investor relations, strategy and research. She is also a member of the Institute of Chartered Accountants of Nigeria (ICAN). She has interest in macro and microeconomics, research, finance and strategy.

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Macro-Economic News

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.

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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

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%).

Core inflation

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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Macro-Economic News

Nigerians spent N13.9 trillion on household consumption in Q4 2020, an increase of 16.6%

Household consumption expenditure of Nigerians rose by 16.59% in Q4 2020 to stand at N13.92 trillion.

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Misery Index
Household consumption expenditure of Nigerians rose by 16.59% in Q4 2020 to stand at N13.92 trillion

The final consumption expenditure of households in Nigeria hit N13.92 trillion in the fourth quarter of 2020. This is according to the recently published Nigerian Gross Domestic Product report (Expenditure and Income Approach), by the National Bureau of Statistics (NBS).

According to the report, Nigeria’s household consumption rose by 16.59% in Q4 2020 to stand at N13.92 trillion, compared to N11.94 trillion recorded in the corresponding quarter of 2019. It also represents a 20.76% increase compared to N11.52 trillion recorded in the preceding quarter.

READ: Nigerians earn N16 trillion as salary and wages in 2017 up 11%

Major Highlights

  • Household consumption expenditure in Q3 and Q4 2020 grew by 6.1% and 16.59% year-on-year in real terms.
  • The annual growth rate in real household consumption expenditure stood at 0.81% as against a decline of 1.06% recorded in 2019.
  • Government consumption expenditure recorded growth rates of 99.18% and 12.13% in Q3 and Q4 2020 respectively, while the annual growth rate stood at 61.58% in 2020 compared to 8.78% recorded in 2019.
  • Although Net Exports recorded positive growth rates in the first two quarters of 2020 but turned negative in the third and fourth quarters of 2020. It dipped by 52.39% and 72.61% in Q3 and Q4 2020 respectively.
  • By annual consideration, net export declined by 29.55% in 2020 as against a growth of 7.64% recorded in the previous year.

However, national disposable income grew by 4.44% in the third quarter of 2020 and 3.13% in the fourth quarter of the year, while a 3.34% growth was recorded as the annual growth compared to 0.35% growth recorded in 2019.

Compensation of employees, dipped by 2.32% in Q3 2020, before recording an increase of 6.36% in the fourth quarter of the year. The decline in the third quarter could be largely attributed to the downturn caused by the covid-19 pandemic, forcing many organisations in the country to either downsize their staff strength or embark on a pay cut.

READ: Covid-19: Nigerian record worst consumption expenditure in over 12 quarters

What this means

  • Consumption expenditure is an important factor in determining economic growth for any country. Nigeria recorded its worst quarterly consumption expenditure in the second quarter of 2020.
  • This was due to the effect of the covid-19 pandemic on the Nigerian economy, which eventually led to a second recession in 5 years as Nigeria’s real GDP contracted by 6.1% and 3.62% in Q2 and Q3 2020 respectively.
  • It is, however, important to note that Nigeria recovered from the covid-induced recession in the fourth quarter of the year as the real GDP expanded by 0.11% in Q4 2020.

READ: Nigeria’s GDP contracts by 1.92% in 2020, as economy initiates recovery

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International trade

In the third and fourth quarters of 2020, real exports declined by 42.05% and 57.79%, year on year, resulting in an annual growth rate of -26.96% in 2020. However, on a quarter on quarter basis, real exports remained negative from Q1 2020 to Q4 2020.

Due to declining rates of growth in exports and imports in 2020, the growth in the net balance of trade (or net exports) was negative in Q3 and Q4 2020. On a year-on-year basis, the net trade balance declined by 52.39% in real terms in Q3 and also dipped by 72.61% in Q4.

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READ: CBN blames petroleum import for Nigeria’s $5.2 billion current account deficit

What you should know

  • The Nigerian economy expanded marginally by 0.11% in Q4 2020. It, however, contracted by 1.92% in 2020 to stand at N70.14 trillion in real terms.
  • The final consumption expenditure of households in Nigeria stood at N42.81 trillion in 2020.
  • Individual consumption expenditure for general government stood at N1.68 trillion while collective consumption stood at N4.98 trillion in the same period.

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