… projects 17.93%, 18.43% for March, April
- Food, energy cost, insecurity, forex are drivers
A new survey from the stable of the Lagos Chamber of Commerce and Industry (LCCI) has projected that Nigeria’s headline inflation for the month of February is expected to hit 17.24 per cent from 16.47 per cent recorded in January
Also, the LCCI in the report said that consequent headline inflation for the months of March and April were expected to record 17.93 per cent and 18.43 per cent respectively, going by the chamber’s model on inflation rate projections.
LCCI, in the report titled, ‘Spiraling Inflation: Cost Implications for Businesses and The Economy expected the country’s headline inflation rate to remain elevated in the coming months as the combination of underwhelming food production, higher energy costs, lingering foreign currency liquidity and heightened insecurity in major food producing states, would continue to mount pressure on consumer pricing.
The research was conducted by Dr. Mathew Ojo, Assistant Director, Research and Advocacy of LCCI, and three other senior managers – Mr. Rotimi Oyelere, Senior Research Officer; Mr. Israel Odubola, Senior Research Officer; and Mr. Fredrick Atseyinku, Research Officer.
The LCCI survey, which was cited by New Telegraph, indicated that the commencement of planting season in the second quarter was expected to keep food production subdued, thereby triggering food prices in the country.
The chamber also explained that aside the major factors responsible for the uptick in headline inflation, basically supplyside issues, which include the heightened insecurity around the country, but more pronounced in Northern and Middle Belt region – the major foodproducing regions in Nigeria, are increasing cost of transporting food items from farms to markets as a result of elevated prices of petroleum products (diesel, PMS), weak productivity in the agriculture sector and increased cost of agricultural inputs.
Besides, the chamber disclosed in the report that the current inflationary pressure were majorly cost-driven, which are beyond the monetary policy control. It added that the core duty of the Central Bank of Nigeria (CBN) in stabilising prices had failed despite various measures to curb inflation.
While highlighting the supply chain disruptions, the chamber emphasised that nonetheless, food inflation had been responsible for the continued uptrend in consumer prices. According to the LCCI in the survey, COVID-19 propelled the Federal Government to impose lockdown and movement restrictions as part of the efforts in containing the spread of the deadly virus in 2020.
However, the chamber noted that these policies caused disruptions to activities in the country’s agricultural sector as farmers were unable to access their farmlands, thereby leading to supply shortage of agricultural output. Moreover, the chamber pointed out that the unfortunate situation prevented farmers from taking advantage of the planting season to grow crops, even 2020’s harvest was underwhelming.
Consequently, the chamber stated that the increased demand for agricultural products amid food supply shortage triggered food costs, as supply disruptions were further worsened by flood incidences which affected some parts of producing states, destroying crops shortly before the harvest period.
On security impacts, the LCCI said that the Northern region, which accounts for a major chunk of food production, was currently faced by persistent security crisis, which has seen farmers being driven out of their farmlands. In fact, the chamber’s survey alluded to the facts that all the major food producing states in the country were suffering from security challenges, ranging from kidnapping to destruction of farmlands.
In particular, the survey explained that the persistent security concerns in many major food producing states portended a severe risk to Nigeria’s food security agenda and poverty reduction efforts of the Federal Government.
Also, on higher food distribution costs, the LCCI stated that logistics costs relating to production and distribution of food supply had been impacted by higher energy costs, including power and petroleum products as well as highway extortions, which further adds to the cost of transporting food produce to major markets, while food dealers often transfer increased distribution costs to final consumers inform of higher prices, thereby stocking consumer prices.
LCCI said: “The unabated rise in inflation has continued to impact the business environment with serious implications for economic stability.
Despite efforts by fiscal and monetary authorities to drive down prices through several interventions aimed at boosting local food production, inflation accelerated further to 16.47 per cent in January 2021, marking the highest price level since May 2017.
“Rising food cost has been the chief driver of inflationary pressure, with food inflation hitting a record 20.57 per cent in January 2021, the highest since 2009 Consumer Price Index (CPI) began. Headline inflation north of 16 per cent has not only exceeded the tolerant limit of monetary authorities, but could thwart efforts of fiscal and monetary authorities in bringing back the economy to growth path.
“The stubbornly high inflation rate should be a big worry for the monetary authorities as CBN will find it more complicated to stabilise prices given that inflation pressures are structurally induced.”