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Macro-Economic News

CBN blames herdsmen and bandits for galloping inflation rate

Emefiele while addressing the media on Tuesday stated that Nigeria’s growing food inflation is caused due to worsening security challenges.

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The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has explained that the uptick in Nigeria’s food inflation is due to the worsening security situation in many parts of the country.

He disclosed this while addressing the media after the meeting of the monetary policy committee on Tuesday, where the committee voted to retain the MPR at 11.5% and other parameters constant.

Godwin Emefiele stated that the increase in inflationary pressure is attributable to security challenges in the food-producing areas in Nigeria, where farmers face frequent attacks by herdsmen and bandits in their various farms.

According to data from the National Bureau of Statistics (NBS), Nigeria’s food inflation stood at 21.79% in February 2021, the highest rate recorded in over 15 years.

READ: CBN to increase loans to agricultural sector to 10% of total bank credit

“This persisting uptick in food inflation, however, was the major driving factor to the uptick in headline inflation. This was due to the worsening security situation in many parts of the country, particularly, the food-producing areas, where farmers face frequent attacks by herdsmen and bandits in their farms.

While the Bank is intervening significantly in the agricultural sector, the rising insecurity in some food-producing areas is limiting the expected outcomes in terms of supply to the market, thus contributing to the rise in food prices. The Committee further noted that the key drivers of the increase in core inflation included, the hike in the price of Premium Motor Spirit (PMS), the upward adjustment in electricity tariffs, and the depreciation of the domestic currency (naira).” CBN MPC.

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

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Soaring inflation despite CBN interventions

Despite the significant interventions made by the apex bank in the Agricultural sector, food prices are soaring and this is affecting the country’s headline inflation.

  • According to the communique of the MPC meeting, the rising insecurity in some food-producing areas in Nigeria is limiting the expected outcomes in terms of supply to the market despite significant interventions in the agricultural sector, thus contributing to the rise in food prices.
  • In terms of funding, the Committee noted that the CBN has disbursed funds under its various agricultural interventions towards improving food supply in Nigeria.
  • The Committee noted the disbursement of N107.60 billion to 548,109 farmers cultivating 703,619 hectares of land between Q4 2020 and Q1 2021 to boost dry season output in support of agricultural value chain development.
  • Total disbursements as of the end of February 2021 amounted to N1.487 trillion under the various agricultural programmes, of which N686.59 billion was disbursed under the Commercial Agricultural Credit Scheme (CACS).
  • A sum of N601.75 billion was also disbursed under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers to support food supply and dampen inflationary pressures.

Notably, under the Targeted Credit Facility, the Bank has disbursed N218.16 billion to 475,376 beneficiaries, of which 34% of beneficiaries are SMEs. Under AGSMEIS, N111.62 billion has been disbursed to 28,961 beneficiaries, 70% of which are in the agricultural sector.

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READ: Nigeria’s inflation rate rises to 17.33% in February 2021, highest in four years

Why this matters

With Nigeria’s inflationary pressure on the increase and the CBN’s continued approach of holding the benchmark interest rate so as to stimulate the economy, improve productivity and create employment by means of continuous interventions to strategic sectors of the economy:

  • the government and other security stakeholders need to step up efforts towards ensuring adequate security in the country, especially in food-producing areas, to stem the tide of rising food prices; and
  • there is a need to focus more on the consolidation of the recovery process that started in 2020.

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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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