Following the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) yesterday, showing that Nigeria’s inflation rate rose to 14.23 per cent in October 2020, Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) said the country was in for a tougher times if the Federal Government does not urgently re-open the land borders for business and also fix other challenges in the economy.
The Director-General, NACCIMA, Ambassador Ayo Olukanni, in an interview with New Telegraph, explained that the closure of land borders from August last year; the COVID-19 outbreak and its attendant lockdowns in the first two quarters of 2020; the #EndSARS protests and civil unrest of the last few months have contributed negatively to production and consumption.
According to him, the NBS report presented an inflation rate of 14.23 per cent (Year-on- Year change) for the month of October 2020, indicating a 14-month continuous increase in food prices levels. Speaking on the economic implication, the NACCIMA director-general said: “If left unabated, the erosion of the purchasing power of the average Nigerian in an environment characterized by high unemployment rates and declining national output (GDP growth rate) may plunge the economy into depression.
“We, once again, counsel the government at all levels to accelerate the effective implementation of all stimulus packages and intervention funds designed to support the production processes of the real sector, while promoting the spending power of the average Nigerian.
“The report also shows that the rising inflation is primarily driven by high cost of food items. Inflation rate (food items, year-onyear change) stands at 17.38 per cent, rising consistently for the past 14 months.
It is, therefore, intuitive that attaining food security at this time will go a long way to stablising general prices,” he said. Also reacting to the inflation data in a note made available to New Telegraph, Cowry Asset Management Limited said: “The envirise in inflation rate was chiefly due to an increase in food inflation rate to 17.38 per cent in October (from 16.66 per cent recorded in September).
“We believe that the spike in food inflation was due to the weak harvest season induced by low planting activity given the restrictions on movements amid COVID-19 crisis and the #End- SARS protest.”
The firm further pointed out that core inflation rate spiked to 11.14 per cent (from 10.58 per cent in September) due to a rise in transport (occasioned by higher fuel price), clothing and footwear as well as housing, water and electricity, among others.
It predicted that inflation was likely to remain elevated in 2020 “amid anticipated rise in food prices, the recent increase in the price of premium motor spirit and the fast approaching festive season.” On his part, Senior Research Analyst at FXTM, Mr. Lukman Otunuga, said the unsavoury combination of border closures, coronavirus related disruptions and lower interest rates fuelled inflationary pressures in Africa’s largest economy.
“With consumer prices projected to jump to almost 14 per cent in October, this will be the highest rate since February 2018. In a perfect world, government may have deployed tight fiscal policy to tame inflationary pressures.
“However, such a move that involves raising taxes and limiting government spending may do more damage than good at a time where Nigeria continues to heal wounds inflicted by COVID-19. With inflation projected to rise amid on-going border closures, the Central Bank of Nigeria may have limited room to loosen monetary policy. “In absence of lower interest rates, the Central Bank of Nigeria may revisit the loan-todeposit policy. Such a strategy was seen encouraging banks to lend and de-risking the real sector, particularly SME’s. Although consumer credit improved during the first few months of 2020, the coronavirus outbreak disrupted cash flow and income of individuals and businesses.
“This raised the risk of bad loans, ultimately reducing lending by banks to consumers. However, last week’s announcement from Pfizer and BioNTech of encouraging results from their late-stage trial for COVID-19 created a sense of hope and light at the end of the tunnel. Market optimism over a vaccine bringing an end to this pandemic could boost sentiment and rekindle confidence.
“The most important question for Nigeria is whether it has the ability to recover back to pre-coronavirus levels. Economic growth is expected to remain negative during the third quarter of 2020 after contracting -6.10 per cent in Q2. With oil prices capped by demand-side factor, the International Monetary Fund’s 2020 growth forecast of -4.3 per cent could become reality.” Meanwhile, the National President, All Farmers Association of Nigeria (AFAN), Arc. Kabir IBRAHIM, in an interview with this newspaper explained that the rising food prices were bad signals for Nigeria’s quest to attain food sufficiency. According to him, insecurity, COVID-19 and recently #EndSARS protests are the reasons for rising cost of food items in the country.
He said: “You can see now that the drop in food prices we expected in November because of harvest is not manifesting because of insecurity and COVID- 19 on the food system. “So, the inflation rate has come to stay. So, it is not something that will come down this year, the only saving grace is to concentrate on dry season farming to make up for the shortfall.”