Nigeria’s July inflation rate jumped to 19.64 per cent from 18.60 per cent in June, signaling a looming cost of living crisis in Africa’s most populous nation.
According to the National Bureau of Statistics, the 19.64 per cent inflation represents the country’s highest inflation in 17 years.
The Statistician-General of the Federation and Chief Executive Officer, National Bureau of Statistics, Prince Semiu Adeniran, said this in the Consumer Price Index for July 2022 released by the bureau in Abuja on Monday.
Economists and other stakeholders, in separate interviews with The PUNCH, warned that the rising inflation would worsen hunger in the country, adding that the government risked mass protests similar to the one in Sierra Leon recently.
Giving a breakdown of the report in a statement, Adeniran said the CPI measures the average change over time in the prices of goods and services consumed by people for day-to-day living.
According to him, it was a core macroeconomic indicator used in the derivation of the inflation rate for policy, planning, and monitoring of an economy.
Adeniran said the report showed that in July 2022, on a year–on–year basis, the headline inflation rate was 19.64 per cent.
“This is 2.27 per cent points higher compared to the rate recorded in July 2021, which was 17.38 per cent,” he said.
“This shows that the headline inflation rate increased in July 2022 when compared to the same month in the previous year of July 2021.”
On a year-on-year basis, the urban inflation rate was 20.09 per cent, which was 2.08 per cent higher compared to 18.01 per cent recorded in July 2021, the NBS said.
The July 2022 rural inflation rate was 19.22% per cent, compared to the 16.75 per cent recorded in July 2021.
Similarly, the food inflation rate in July 2022 was 22.02 per cent on a year-on-year basis, which was 0.99 per cent higher 21.03 per cent in the corresponding period of 2021.
Sierra Leone’s crisis
Crisis erupted in Sierra Leone in August following high food prices in the West African nation. The country’s government imposed a curfew after 20 persons, including the police and civilians, were killed in violent clashes in the West African nation last week.
Like Nigeria, inflation rate has doubled in Sierra Leone in the last 18 months, moving from 11.9 per cent in February 2021 to 24.9 per cent, pushing the poorest of the poor into misery.
In the light of the rising inflation, business groups have asked Nigerian policy makers and the country’s President, Major General Muhammadu Buhari (retd.), to buckle down their shoes and save the country from a looming danger.
The International Co-ordinator, Advocate for People Right and Justice, Victor Giwa, said Nigeria was at the point of embarking on a protest similar to that of Sierra Leone as the average Nigerians could hardly survive in the country.
He, therefore, advised the government to engage and listen to the demands of the citizens.
The Director-General of the Nigerian-American Chamber of Commerce, Sola Obadimu, who also spoke with The Journalist, said the worsening inflation crisis stemmed from bad management of the economy, which was steering the country towards tougher times.
He said, “There are natural consequences of bad economic management. That is why you see mass emigration. This is a consequence of a failing economy, a failing nation. The currency is increasingly becoming worthless. The economy is not being managed well. The economy is not supposed to be managed by the CBN governor. He has his own aspect to manage, which is the monetary. Inflation is now at an uncontrollable level. You go to a store, you buy something for N2. When you go there tomorrow, it’s N5.
“By the time you go the following week, you meet another price entirely. Nobody is doing anything about it. We are just talking about May 2023, but what happens between now and May 2023?”
He advised government to return to the basics of managing an economy to avoid its total collapse, which he noted would pose monumental challenge to the next administration, which would have to weather much of the economic storm caused by the present government.
“What if naira is already N1500 to a dollar by May 2023? At any rate, if it gets that bad, what does the incoming person do? He’s already hamstrung. He’ll start to borrow money again for recurrent expenditure and debt servicing? We are going the Zimbabwean way, and nobody is doing anything about it. The basics are not just there to properly situate this economy.”
The founder of the National Council of Managing Directors of Licensed Customs Agents, Lucky Amiwero, called for a total overhaul of the entire economy to prevent the looming crisis.
He said that there was so much reckless spending on the side of the government.
“There is a need for a total overhaul of the system. The government spending is too much, and much of it is reckless. How many private jets do we have in Nigeria? How did they get the private jets? You see many governors with security votes everywhere. Are they affected by the inflation?
“When you look at the whole thing, you will make a very good analysis. If you look at the way they are stealing oil and all that, you will know that everything is not going on well. The government is reckless in spending; corruption is high, the whole thing is turning upside down.”
Also speaking, the founder of the Association of Registered Freight Forwarders of Nigeria, Frank Ukor said, “Look at the exchange rate of the naira, I don’t know what we can do because we are not producing anything. If we are producing something, I would have said that we can do something to increase the value of naira, but we are not producing. The only option is that election is coming up next year, let us vote the right person, let us change this country from consumption to production and that is the only way things will change. We need to start manufacturing things we need to change the corrupt leaders. They are the people killing the whole system, taking the money outside the country.”
The president of the African Association of Professional Freight Forwarders and Logistics of Nigeria, Frank Ogunojemite, said until the government worked on indigenous companies, the situation would not change.
“As it is now, Nigeria depends on imports. So, if we can start more of export to generate money to the country, then things can be fair enough. And until the government works on indigenous companies, things will continue the way they are. Inflation will continue to go high until we work on our indigenous companies and support them. The most important thing for this country is to work on our export because it is going to generate employment for the people and generate revenue for the government.”
A professor of Economics at Olabisi Onabanjo University, Ogun State, Prof Sheriffdeen Tella, said that the rising inflation would make Nigerians buy fewer goods.
Tella said, “With the increase in prices, consumers with little money will have to buy less.
“The people we should also be concerned with are the producers. Cost of production will be very high. It will further lead to unemployment as these producing companies may be unable to expand.”
A former President of the National Accountants of Nigeria, Dr Sam Nzekwe, said that rising inflation would push more Nigerians into poverty and lead to low purchasing power.
He said, “When you have high inflation like this, fixed income earners will likely go back to poverty lane. It is going to throw a lot of people to poverty. There is no salary or income increase for fixed income earners.
“Most Nigerians will not meet their daily needs. It is a terrible thing. More Nigerians are going down poverty lane and will be unable to buy things. Naira is completely devalued and purchasing power is very low.”
Speaking exclusively with The Journalist, Professor of International Economic Relations at Covenant University, Jonathan Aremu, said Nigeria’s inflation woes would continue until the government provided an enabling environment that would boost local production.
He said, “Everything lies in the hands of the government. You can’t blame the private sector. They want to do business, but the environment is full of punitive policies. Exchange rate is not good, production activity is down, and infrastructure is not OK. What do you do when there are fewer goods to compete with available naira? There is going to be inflation. That is the simple definition of inflation.”
Aremu, who is also a former Assistant Director of Research at the Central Bank of Nigeria, queried the rationale behind allowing the apex bank to manage all facets of the economy.
He added, “The CBN manages a subset of the economy: the monetary and the exchange rates. It is not in charge of fiscal policy. It is not in charge of development policy. It is not in charge of industrial or agricultural policy. We have different sectors of the economy in that area, but it should focus more on monetary policy and exchange rate to ensure that the macroeconomic policy objectives with respect to the growth rate in the economy.”
On his part, a Professor of Economics at the University of Uyo, Akpan Ekpo, blamed cost of governance as proprietary factor fueling the inflationary pressure.
Ekpo said, “The dollar is about N670 to N419 at the official rate. That disparity is too wide, and the inflation is passing through that. It is what we call pass-through inflation. Farmers can no longer farm, so they’re not producing enough. When you have scarcity, of course price will go up. Nigeria’s inflation is also structural.
“Diesel price has gone up. This is also part of the problem. It is both the supply and demand side. Then the external side, imported inflation is also a problem. There is also the Russia-Ukraine war where the supply of grain for certain essentials like bread is no longer coming forth. All those things are making prices go up. If you curtail the domestic problems, you may have some sort of improvement, otherwise it may end up becoming run-away inflation which we will not be able to contain.”
In the same vein, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the heightened inflationary pressures in the Nigerian economy remained very troubling.
In a chat with our correspondent, Yusuf noted that the major inflation drivers had not abated, but had become even more intense. These factors, he said, included transportation costs, logistics challenges, exchange rate depreciation, forex liquidity issues, hike in energy prices, climate change, insecurity in many farming communities and structural bottlenecks to production.
According to him, the accelerated fiscal deficit financing by the CBN was a significant inflation driver. He also noted that the financing of fiscal deficit had been elevated to disturbing levels with huge implications for money supply and consequent effect on inflation.
He said, “Mounting inflationary pressures weakens purchasing power of citizens as real incomes are eroded. It aggravates pressure on production costs, negatively impacts profitability, erodes shareholders value and undermines investors confidence.
“In many cases, increases in production costs cannot be transferred to consumers. The implication is that producers are also taking a hit. This is more pronounced where the demand for the product is elastic. These are products that consumers can readily do without.”
Yusuf further stated that tackling inflation requires urgent government intervention to address the challenges bedevilling the supply side of the economy and the moderation of fiscal deficit monetization.
An analyst, Bala Zakka, said Nigerian leaders had lost the confidence reposed in them, saying inflation had eroded the disposable incomes of several families.
The Chief Executive Officer, Connected Development, Hamza Lawal, explained that there was a direct correlation between economic desperation, insecurity, and political instability, noting that the nation was at a tipping point.
He added, “Nigeria’s all-time inflation should be a massive concern for political elite and economic managers. From an economic standpoint, we are at the tipping point, it seems.
“Following global examples like the Arab Spring (2010/2011), recent events in Sierra Leone, Nigeria has every cause to be alarmed and anxious.
“Nonetheless, since politicians think of the next election and statesmen think of the next generation, the burden for the political elite should be to save Nigeria from imminent combustible situations. One way this can be done, in short term, is heavy regulation on campaign financing and illicit financial flows.”
The Chairman, Human and Environmental Development Agenda, Olanrewaju Suraj, said the NBS statistics had only proven it was imperative for Nigerians to take civil action and demand better and improved living.
Speaking with our correspondent, he said, “I am not going to advise the government to avoid mass action but I am going to advise Nigerians to actually take the appropriate civil and legal actions, including civil disobedience in terms of demanding for better services from people that are either appointed or elected into public offices.”
According to him, the level of insecurity was a serious concern, noting that “the president has refused even in the face of obvious reason to act by removing non-performing officials.”
Suraj added, “For that reason, it is obvious the President and his government are taking the people for a ride and it is important for people to show their displeasure otherwise, it is just going to be business as usual on the part of government and its officials.”
A Professor of capital market and Chairman Chartered Institute of Bankers of Nigeria, Abuja Branch, Prof Uche Uwaleke, said, “The increase in headline inflation for month of July was expected against the backdrop of rising inflation globally on account of supply chain disruptions from the Russian Ukrainian conflict.
“This outcome buttresses the argument that the monetary approach to tackling cost-push inflation does not lie in a hike in the Monetary Policy Rate.
“Recall that the MPC in its meeting last month increased the MPR by 100 basis points in a bid to tame inflationary pressure.
“The reality is that inflation expectations will continue to grow as long as the cost of petroleum products, electricity, exchange rate and insecurity continue to rise.”
According to him, the rising government deficits and borrowing tend to compound the problem.
“I think the increase in core inflation has a lot to do with the recent scarcity of forex and associated volatility in exchange rates,” he added.