Friday, September 14, 2012 11:19 / FDC
The Monetary Policy Committee meets on Monday to review Nigeria’s macroeconomic performance and take some far reaching decisions.
The FDC Lagos urban inflation survey shows a further easing in inflation to 11.34% in the month of August and the naira continues to strengthen against the dollar. The External Reserves’ picture is also positive after spiking to a 25month high of $40.41bn.
Are these economic conditions good enough to spur a change of posture at the apex bank?
Second, Nigeria is increasing its external borrowing especially from China as evidenced by the recent $600m loan given to the government from China EXIM bank, for the construction of the Abuja railway project and Nigeria’s Galaxy Backbone project.
Is Nigeria borrowing too much? Its export to debt service ratio of 9.4% is still way below its peers.
This edition of FDC’s monthly publication sheds more light on these issues. Download Report Here
LAGOS INFLATION SURVEY
“FDC‘s Lagos urban inflation moderated by 0.51% to 11.34% in August from 11.85% in July. The decline as expected was influenced by a further ease in the prices of major commodities within the Lagos Metropolis. The non-food index declined further by 1.19% to 9.91% in August as against the previous month‘s 1.12% fall in prices. The decline in the non-food index could be ascribed to the fall in the prices of toiletries, paints, kerosene, and accommodation (single rooms and flats) in August compared to July figures.
While the prices of most building materials and air transport in-creased by an average of 9.92% and 1.85% respectively, the prices of clothing materials, road transport, electricity and some other items in the non-food index remained unchanged month-on-month (m-o-m).
The food index rose by 0.51% to 12.08% in August. The major drivers were the increase in the prices of key food commodities such as vegetables, yam flour, melon seeds, pepper, beans, wheat and rice. However, the prices of yam, cereals, fruits and tomatoes declined m-o-m. We observed that the increase in the import tariffs for wheat grains and rice are beginning to trickle down to consumers, as the prices of wheat and rice rose by 15.4% and 10% in August respectively. The increased cost of wheat has translated to a 4.55% increase in the cost of bread. The further easing of inflation in August (based on our survey) notwithstanding, our initial projection for the official headline inflation in August remains unchanged at 12.4% (± 0.3%)”.
THE NEED FOR A FISCAL STIMULUS AS A CATA-LYST FOR POVERTY REDUCTION
NIGERIA’S DEPLORABLE POVERTY RATE
“The eradication of poverty is a priority for practically every active government today. However, the approach that most governments take to tackling the problem leaves much to be desired; Nigeria, (Africa‘s most populous country at 162.4 million people and the region‘s largest oil producer at 2.4 million barrels per day), is unfortunately an example of this. Despite domestic economic growth peaking at 8.6% in 2010, the poverty rate rose to 60% of the population in that same year (according to the NBS). The hardest hit regions of the country are in the northwest and northeast. These statistics provide a disheartening paradox that needs to be addressed with the full support of the Federal Government and all 36 States. The best way to address poverty would be to implement a stimulus package that puts funds directly in the hands of those that need it, thereby providing an effective and welcome measure of reprieve from their grave, daily state of affairs.”