Economists have urged the government to tackle the challenges posed by high energy costs, and insecurity, which has slowed down food production and foreign exchange volatility, to tame the accelerating inflation in the country.
The economists spoke to Saturday PUNCH on the back of the country’s inflation rate climbed higher to 31.70 per cent in February, from 29.90 per cent in January 2024, according to the latest Consumer Price Index and inflation report by the National Bureau of Statistics on Friday.
Professor of Economics and Dean, College of Postgraduate Studies, Caleb University, Imota, Lagos, Segun Ajibola, said the inflation rate may not reduce if the economic fundamentals are not addressed.
According to the former president of the Chartered Institute of Bankers of Nigeria, 70 per cent of inflationary pressure in Nigeria is coming from the direct cost of consumables of both local and imported commodities.
“Some of these things don’t happen by chance and we have been on this issue of inflation for months and it shows the fundamentals have not been addressed. If we keep pursuing tight monetary policies and curtail the total money supply in the system believing that we have too much money in the system and fuelling inflation, we are wrong.
“If at all, we have too much money in circulation, it is a derived factor and not the direct cause of our kind of inflation in Nigeria. 70 per cent of inflationary pressure in Nigeria is coming from the direct cost of consumables of both local and imported commodities.
“It is called push inflation because the cost of production has increased massively for reasons well known to us. We are also highly import dependent and we have seen the move in the foreign exchange market. Food inflation is also caused by the cost of inputs that are applied to our agricultural produce. We need to address the problem of costs of energy, transportation and other inputs before we can get a reduction in the inflation rate,” he told Saturday PUNCH in a telephone chat on Friday.
Also, the Chief Economist/Managing Editor of Proshare Nigeria, Teslim Shitta-Bey, noted that high insecurity in the country’s farm belt had been a major driver of inflation.
According to Shitta-Bey, incessant kidnapping and attacks on farmers and motorists in the food belt had reduced farm-gate production.
“It is not just about the farmers. Even if the farmers produce and the people who transport the food are waylaid, that has happened several times between the North and the Southern border towns, which has put a premium on the cost of transportation. So, if transporters would move goods, they have to charge higher because of the high risk. “Insecurity is a major driver of food inflation, which currently is about 37 per cent,” he explained.
Shitta-Bey added that manufacturers had been grappling with the increased cost of energy, adding that the two drivers of inflation have had a significant impact on the cost of production.
“The current problem is a supply-side challenge. That is one of the reasons no matter how high the CBN increases its monetary policy rate, it is not likely to curb inflation,” he asserted.
The Managing Director of Afrinvest Securities Limited, Ayodeji Ebo, attributed the current price hikes to fluctuations in the exchange rate, stressing its pervasive impact across all sectors.
The Afrinvest MD told Saturday PUNCH that the government needed to intensify efforts in stabilising the exchange rate.
He stated that efforts must be made to ensure enough supply of dollars to keep the exchange rate stable.
“Changes in the exchange rate affect everything, across all chains. On a year on year, we will see a rise in inflation figures, but month on month, it will reduce,” Ebo remarked.
Further, Ebo expressed optimism regarding the recent reopening of the borders, foreseeing a potential reduction in food prices as a result.
Meanwhile, the latest inflation rate, which indicated a 1.80 per cent month-on-month rise, is the 14th consecutive monthly increase and a record-high of over 20 years.
According to the report, on a year-on-year basis, the headline inflation rate was 9.79 per cent points higher compared to the rate recorded in February 2023, which was 21.91 per cent highlighting that the headline inflation rate (year-on-year basis) increased in February 2024 when compared to the same month in the preceding year.
The report read, “In February 2024, the headline inflation rate increased to 31.70 per cent relative to the January 2024 headline inflation rate which was 29.90 per cent.”
Also, the month-on-month headline inflation rate in February 2024 reached 3.12 per cent, an increase of 0.48 per cent from January’s 2.64 per cent, indicating that the pace at which average prices rose in February 2024 exceeded the rate of price increase in January 2024.
Kogi, Rivers, Oyo and Bauchi States were also adjudged as the most expensive states in food and all items inflation.
It further stated that the highest increases were recorded in prices of passenger transport by road, actual and imputed rentals for housing, medical services, pharmaceutical products, etc.
The NBS stated, “Looking at the movement, the February 2024 headline inflation rate showed an increase of 1.80 per cent points when compared to the January 2024 headline inflation rate. On a year-on-year basis, the headline inflation rate was 9.79 per cent points higher compared to the rate recorded in February 2023, which was 21.91 per cent.
“This shows that the headline inflation rate (year-on-year basis) increased in the month of February 2024 when compared to the same month in the preceding year (i.e., February 2023).
“Furthermore, on a month-on-month basis, the headline inflation rate in February 2024 was 3.12 per cent, which was 0.48 per cent higher than the rate recorded in January 2024 (2.64 per cent).”
The CBN had in February reviewed the benchmark interest upward by 400 basis points to a record 22.75 per cent.
Justifying reasons for the hike, the CBN Governor, Olayemi Cardoso, explained that members considered various scenarios, including whether to hold or hike policy and concluded that inflation could become more persistent in the medium term and pose more regulatory issues if not well-anchored.
SOURCE: PUNCHNG
