January 19, 2012
Click Here to download Full Report
*As NBS estimates N207bn lost to subsidy removal strike action
The usual seasonal hike in commodity prices during Christmas was unable to push up Nigeria ’s inflation which rather moderated to 10.3 percent in December 2011, slightly lower than the 10.5 percent recorded in November.
Food inflation year-on-year, however leaped to double digit, settling at 11 percent, the highest since June 2011. The increase in food index was however moderated by a drop in core inflation.
In its Consumer Price Index report, the National Bureau of Statistics confirmed on Wednesday that there were increases in the prices of food items, due to the festive period. This pushed food sector inflation slightly higher than November records, as well as 9.1 percent average for the previous six months.
The largest contributors to consumer inflation in December were the high prices of food items, kerosene and transportation, the statistics office said, noting that average monthly food prices rose in December 2011, by 2.2 percent, when compared with the November 2011 estimates.
“The level of the Composite Food Index was higher than the corresponding level a year ago, by 11.0 percent. This was higher than the 9.6 percent year-on-year increase recorded in the November. The rise in food inflation was mainly due to the increasing cost of yam, other tubers, cooking oil, meat, fruit, vegetables and beverages. The average annual rate of change of the index was an increase of 10.3 percent for the twelve-month period ending December 2011,” it noted in the report.
Core inflation which excludes the prices of volatile agricultural products, settled at 10.8 percent year-on-year, slightly lower than the 11.5 year-on-year change recorded in November.
But the index, month-on-month, rose by 0.2 percent in December 2011. “The increase was mainly due to increases in transport fares, kerosene and hotel and restaurant charges. The average annual rate of rise of the index remained stable at 11.7 percent for the twelve-month period ending December 2011,” the NBS said.
Meanwhile, the Bureau estimates that Nigeria incurred about N207, 40828 billion economic losses during the eight-day nationwide strike action initiated by the Nigerian Labour Congress and Trade Union Congress, to protest the removal of fuel subsidy by President Gooodluck Jonathan.
In a brief on the impact of the strike on the economy, the NBS relied on the Gross Domestic Product (or GDP) to estimate the monetary value of economic activity “lost” during the period of the strike. It however anticipates that these estimates will be revised in the coming weeks, as more information on the extent of compliance with the strike, and disturbance witnessed become available.
It noted that the Wholesale and Retail Sector which was the worst hit by the crisis, with respect to absolute amount and relative proportion to other sectors, recorded a loss of approximately N86.98184 billion. This sector accounted for 42 percent of the overall total loss in output during the period.
Wholesale and Retail Sector was followed by the Crude Petroleum and Natural Gas Sector, the largest source of government revenue accounting for N28.71087 billion, and 14 percent of economic losses.
Next was Crop Production, accounting for N15.37 billion and 7 percent of economic losses during the period.
In estimating the cost to the economy by GDP, the Bureau said it took in to consideration that the strike lasted for five and a half working days and a weekend.
“While the strike was called off on Monday 16th January, economic activity across the country only gradually began to be restored later in the afternoon, and several sectors remained completely shut. Additionally, while Saturday and Sunday were regarded as strike free days by protesters and being a weekend, it is expected that many activities would be minimally operative (for example, Financial and Manufacturing sectors),” it explained.
Analysts said December’s inflation figure was broadly in line with expectations, but warned that they expected January’s figure to be affected by the hike in fuel prices.
“The market will now be anxiously awaiting the Jan 2012 inflation data, given the recent 50 percent increase in fuel prices,” said Standard Bank’s Samir Gadio.
“We see inflation rising by up to 200 bps this year, with highs of 14 percent to 14.5 percent y/y in Jul-Aug.”
But he added that this would most likely spur monetary tightening, which could make the bond market more attractive.
“For now, we would recommend a carry trade at the short end of the curve ,the 364-day T-bill yield has fluctuated around 20 percent lately,” Gadio said.
The Bureau clarified that the figures were mere “estimates” for three main reasons, firstly, because the NBS is in the process of rebasing the nation’s GDP estimates which in turn could either increase or decrease the estimates produced in this report, as the GDP rebasing procedure will require adjusting the weights of each component of the GDP estimates, to reflect a more up to date representation of each sector’s proportion of the economy.
Secondly, the figures are early estimates which are derived from projected GDP figures rather than actual surveys, and this has its inherent limitations. In particular, the rate of daily loss significantly affects the final estimates, although they are only at best, estimates, given our understanding of the economy, and feedback we received from sectional operators.
Thirdly, it explained that the estimates did not include the actual cost of violence, such as property destroyed, which it said could be considerably high in certain circumstances, particularly where violent demonstrations occur in large commercial cities.
The Bureau lastly noted that the estimates did not capture secondary-level costs, such as employment opportunities lost, explaining that the real cost of any socio-economic disturbance could not be accurately computed.