Nigeria Economy | |
Nigeria Economy | |
1757 VIEWS | |
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Saturday, December 21, 2019 / 03:00PM / Adesola Borokinni,
Proshare research/Image Header Credit: NBS
With the year 2019 crawling
to an end, consumers and investors alike are worried about the spike in the domestic
inflation rate. In a sharp reversal of a 19-month downward pattern, the domestic
inflation rate has commenced a steady and sustained rise.
National Bureau of
Statistics (NBS) figures show that the consumer price index (CPI), a measure of
domestic inflation, increased by 11.85 percent (year-on-year) in November 2019,
the highest in the last 19 months. The month-on-month inflation declined to
1.02% from 1.07% in October. NBS data suggests that the urban inflation rate
increased by 12.47% (year-on-year) in November 2019 up from the 12.20% recorded
in October 2019, while the rural inflation rate increased by 11.30 percent in
November 2019 from 11.07 percent in October 2019 (see chart 1 below).
Chart1 Inflation rate
Jan.-Dec 2019
Source: NBS Statistical Data
The composite food index rose by 14.48% in November 2019 compared to 14.09% in October 2019. The month-on-month food index declined to 1.25% from 1.33% in October. The rise in the food index saw an increase in the prices of bread, cereals, oils and fats, meat, potatoes, yam and other tubers, and fish. Core inflation, which excludes the price of agricultural commodities, stood at 8.99%, up by 0.11% points (see chart 2 below).
Chart 2 Food Price Inflation
Rate Jan.- Dec. 2019
Source: NBS Statistical Data
Table 1 Selected Food Prices Watch For
November 2019 With YoY & MoM % Changes
Source: NBS statistical data
The top five commodities with the highest average price increase month-on-month are; rice, onions, yam tuber, maize and tomato. Rice increased by 12.14%, Onions 11.43%, Yam tubers 13.05%, Maize 7.25%, Tomatoes 7.64% in November.
The pertinent
question that comes to the mind of the average Nigerian is; why is inflation
rising? A rise in inflation, which signifies a reduction in purchasing power of
the average Nigerian citizen, is a further addition to their misery given the
already alarming rise in the poverty level, low GDP growth rate and
unemployment rate.
Border Trouble
Nigeria's borders with neighbouring
countries, the Benin Republic, Niger and Cameroon were shut with the main aim
of curbing smuggling of goods and illegal commercial activities. Although the
customs comptroller-general claimed that the customs had recorded an upsurge in
revenue since the border closure, the question that weighs to the mind of
concerned Nigerians are: What is the duration of the border closure? Does the benefit
of the border closure outweigh the cost of the border closure? How does the
cost and benefit of the border closure affect the Nigerian citizen?
The most visible effect of the
border closure on the economy and the average citizen is the recent rise in the
inflation rate in Nigeria. The rise in inflation is a major cost of the border
closure for which the average Nigerian citizen must pay. The current rise in the
inflation rate is not unconnected with the border closure. The inflation rate,
which was 11.2% as at the time of enforcing the initial partial border closure,
has risen to 11.85% in November since the Nigeria border has been fully shut. A
large proportion of the goods consumed by the Nigerian populace such as rice,
oil, tomatoes, poultry, and sugar, enters through its porous land borders. Hence,
the temporary closure has led to an increase in the average prices of a few
available goods in the economy.
The speculations of a further rise
in the inflation rate, coupled with the Christmas festivity period getting
closer has caused the inflation rate to rise further. The end of the year usually marks
festivity in Nigeria. The average Nigerian wants to maximize the festive period
by visiting home, buying food and household commodities, wares etc. As a result, the festivity mood causes a spike
in the prices of goods and services, as traders and businesses see the upsurge
in demand, which is attributable to the festive period as an opportunity to
maximize their profits.
A Look Ahead
Given the recent trends in
economic activities, analysts expect that there will be a further inflation
rise in December 2019. There are expectations that there will be a further rise
in the prices of commodities and transportation. A low purchasing power caused
by a rising trend in the inflation rate means there will likely be a slowdown
in consumption activities as well as sales activities in December. Transporters
are most likely to increase prices to take advantage of the festivities.
Although, the CBN governor
said that the rising trend in inflation was temporary, as the government was
pumping in funds to bridge the supply gap. Economic experts have expressed
their pessimism on the effectiveness of the funds allocated in boosting local
production. They noted that the country lacks sufficient reliable statistical
data on the local commodities produced in Nigeria. Hence, making it difficult
to measure the success or outcome of funds given to boost local production.
Related News
1. Inflation - What Goes Up Will
Go Up Again
2. Headline Inflation Increases
By 11.85% YoY In November 2019; 0.24% Higher Than October 2019 Rate
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4. Headline Inflation Up
Again, Puts The MPC On The Spot
5. Headline Inflation
Increases By 11.61% YoY In October 2019; 0.36% Higher Than September 2019 Rate
6. Inflation Rate To Tick
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7. Inflation
Succumbs to Border Closure and Money Supply Growth - Spikes to 11.24%
8. Headline Inflation
Increases By 11.24% YoY In September 2019; 0.22% Higher Than August 2019 Rate
9. Unlocking Liquidity in
Nigeria - Ayo Teriba
10. Foreign Direct
Investment To Africa Remained Steady In 2018
11. Inflation Set to Buck
its Declining Trend
Related News on Border
Closure
1.
Nigeria's Border Closure And The AfCFTA ...Towards Alignment of
Objectives
2.
Consumers May Frontload Festive Purchases On Border Concerns
3.
Nigeria's Foreign Minister Onyema, Lists Four Conditions
For Reopening Borders
4.
FG To Extend Border Closure Till January 31,2020
5.
We Don't Have a Rice Problem - Understanding Sovereign
Comparative Advantages - Tosin
Adeott, Nov 04, 2019
6.
Lagos-Ogun Partnership for Economic Development -
Thoughts on What Is Possible - Olufemi Awoyemi, Nov 03, 2019
7.
FG To Extend Border Closure Till January 31,2020 - Customs, Nov 04, 2019
8.
The Economics of the Rice Conversation - Between A Rock
and a Hard Place - Oct 31, 2019
9.
The Effects of Nigeria's Closed Borders on Informal Trade
with Benin - Brookings - Oct 30, 2019
10.
Thoughts on Nigeria's Rice Bubble - Fasua - Oct 25,
2019
11.
Border Closure Takes Its Toll on The Price Of Rice - FDC, Oct
22, 2019
12.
Inflation Succumbs to Border Closure and Money Supply
Growth - Spikes to 11.24% - FDC, Oct 16, 2019
13.
Border Closure Hitting the Price of Rice - CSL Research, Oct 04, 2019
14.
Border Closures May Only Offer Temporary Subsidy Reprieve - CardinalStone Research, October 11, 2019
15.
Effects of Closing the SEME Border - Coronation Research, Oct 15, 2019
16.
Border Closures Begin to Take Toll on Prices - CardinalStone Research, Oct 15, 2019