After 15 months of persistent rise in inflation, the main drivers of the adverse economic trend – food and non-food items – moderated in February, bringing the rate down to 17.78 per cent.
The National Bureau of Statistics (NBS) revealed yesterday that the February inflation level represented 94 basis points lower than the 18.72 per cent recorded in January.
The development, according to analysts at SCM Capital, is a sign of a decline in the cost of goods and services in the country and is expected to have a positive effect on consumers’ purchasing power. The deceleration of the month-on-month inflation rate raises hope of recovery for the country’s ailing economy.
The Director-General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo attributed the drop in February inflation rate to a response to a cut in demand for foreign items, especially food and other staple products, saying it was a welcome development.
“This first-time decline in 15 months points to the fact that the recession is easing. It appears that the decline in imports has reduced the impact on imported inflation due to foreign exchange demand and constraints. It follows that the pass-through effect of speculation on domestic prices has been marginal”, Ekpo said.
He, however, called for caution because the food index increased year-on-year by 0.71per cent driven by an increase in the prices of various other food items, which also increased on month-on-month basis. Ekpo said care should be taken to address the situation especially regarding food prices because inflation usually affects the poor and low-income earners the most.
Government’s economic recovery plans released recently, forecast inflation to be at 15.74 per cent by the end of 2017 and 12.42 per cent in 2018, which if achieved, could alleviate widespread frustration and the high cost of living.
In a report, the NBS said: “This is a result of slower rises in already high food and non-food prices and favourable base effects over prices in 2016. The drop in inflation rate was mainly due to a significant drop in the core inflation sub-index.”
Core inflation is the summation of all items, except food, and this rose by 16 per cent, being the slowest. The decline was attributed to the drop to base effects, a situation where a higher inflationary period in the corresponding year will result in slower growth a year after.
But a separate food index, which listed staple foods like bread, cereal and meat, showed inflation at 18.53 per cent from 17.82 per cent in January.
The major divisions responsible for accelerating the pace of the increase in the headline index are housing, water, electricity, gas, education, food and alcoholic beverages, clothing and foot wares and transportation services.
Nigeria is grappling with recession and foreign exchange shortages brought by low prices of oil, which is the country’s major revenue source.
The Governor of the Central Bank of Nigeria, Godwin Emefiele, admitted that “we have cost-push inflation, exacerbated by supply shortages in food, fuels, and foreign exchange. That is why the CBN is supporting farmers across the country through various schemes to increase food supply. We are also very responsive to the needs of fuel importers to ensure availability and as much as possible, respond to foreign exchange supply shortages in the market.”
But the Acting Managing Director of Afrinvest Securities Limited, Ayodeji Eboh, said it was nothing much to cheer about, as the figure was only a comparison of one year to date, not the change in the current prices of items in the market .
“If you check the month-on-month headline index, it is 1.49 per cent in February 2017, 0.48 per cent points higher from the rate of 1.01 per cent recorded in January. This means that things are now costlier than one month ago,” he said.
According to him, the lesson from the figures is that it can only get better, but not yet now and the government would need to introduce or implement policies that are pro-agriculture and its entire value chain, including the cost of transportation of the produce.
He said that while electricity tariff increase had posed a question of sustainability, there was also the need for more push in the foreign exchange arena to contain the pass-through effects of imported items, which continue to be out of reach of most Nigerians.