Recall that recent statistics released by the National Bureau of Statistics NBS show that Nigeria recorded the highest rise in its inflation rate in the past four years with headline index increasing to 16.5 per cent in January 2021 from 15.8 per cent recorded in December 2020. Food inflation also rose by 1.01 percentage points to 20.57 per cent in January from 19.6 per cent in December last year. The rise in headline inflation represents the 17th monthly rise in inflation rate since September 2019 when it stood at 11.24 per cent.
Governor of the CBN, Godwin Emefiele, who spoke in Lagos recently, said that the apex bank has noticed that the general price level in 2020 has responded to the several shocks including disruptions to global and domestic supply chains as a result of the coronavirus pandemic and energy price adjustments, especially crude oil. Others are supply/logistics bottlenecks, which reflect insecurity in many parts of the country, the adjustments in the exchange rate, which have made imports more expensive.
He noted that these developments had pushed the headline inflation from 12.26per cent in March 2020 to 12.5per cent in March 2021, a development that conflicts with the need for the fiscal and financial authorities to introduce economic enhancing measures that are urgently needed to help the country exit economic recession in the shortest possible time.
He said: “We note that the general price level in 2020 has responded to several shocks including disruption to global and domestic supply chains as a result of COVID-19, energy price adjustments, supply/logistic bottlenecks reflecting insecurity in many parts of the country, the adjustments in the exchange rate, which has made imports more expensive.
“To this end, headline inflation rose from 12.26 per cent in March 2020 to 16.47 per cent in January 2021. The rise in inflation along with the need to implement growth enhancing measures that would enable the Nigerian economy to emerge from the recession, continues to pose a dilemma for policy making authorities.”.
It was however gathered that research conducted by the apex bank shows that the rise in inflation has been due to cost-push factors rather than demand pull factors. As a result, the CBN has placed greater weight on utilising tools that would address the shocks to economic growth, while at the same time helping to provide facilities that can reduce the cost-push factors in inflation.
Some of these measures include response by the monetary and fiscal authorities. For instance, in response to the impact of COVID-19 on key economic variables, the fiscal and monetary authorities in the country took unprecedented measures to prevent the economy from going into a tailspin. The first objective of such measures was to restore stability to the economy by providing assistance to individuals, SMEs and businesses that had been severely affected by the pandemic, as well as by the lockdown measures. Some of the measures include: one-year extension of the moratorium on principal repayments for CBN intervention
facilities; reduction of the Monetary Policy Rate MPR by 200 basis points from 13.5 to 11.5 percent, between May and September 2020 in order to spur lending.
Others include Regulatory Forbearance granted to banks to restructure loans given to sectors that were severally affected by the pandemic, reduction of the interest rate on CBN intervention loans from 9 to 5 per cent, mobilisation of key stakeholders in the Nigerian economy through the CACOVID alliance, which led to the provision of over N25bn in relief materials to affected 13 households, and the set-up of 39 isolation centers across the country. The authorities also strengthened the loan to deposit ratio policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers, credit to the private sector rose by 17 per cent in 2020, disbursement of over N204 billion to 447,671 beneficiaries, under the target credit facility for affected households and small and medium enterprises, through the Nirsal Microfinance Bank as well as the disbursements of over N83.9 billion in loans to pharmaceutical companies and healthcare practitioners to support 81 healthcare projects, which would expand 14 and strengthen the capacity of our healthcare institutions even as over N476 billion out of our N1 t r i l l ion faci l i t y was disbursed to suppor t 76 manufacturing and real sector projects, which would boost local manufacturing and production across critical sectors, among several others.
Details of the NBS monthly Cosumers’ Price Index Report for January 2021, the food inflation also rose by 1.01 percentage points to 20.57 per cent in January from 19.6 percent in December last year.
The report says: “The consumer price index, CPI which measures inflation increased by 16.47 per cent (year-on-year) in January 2021. This is 0.71 per cent points higher than the rate recorded in December 2020 (15.75 Per cent). Increases were recorded in all COICOP divisions that yielded the headline index.
“On month-on-month basis, the Headline index increased by 1.49 per cent in January 2021. This is 0.12 percentage points lower than the rate recorded in December 2020 (1.61 per cent).”
On food inflation it said: “The composite food index rose by 20.57 per cent in January 2021 compared to 19.56 per cent in December 2020.
“This rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, Yam and other tubers, meat, fruits, vegetable, fish and oils and fats.
“On month-on-month basis, the food sub-index increased by 1.83 per cent in January 2021, down by 0.22 per cent points from 2.05 per cent recorded in December 2020. “
“In January 2021, all items inflation on year on year basis was highest in Kogi (21.4 per cent), Oyo (20.17 per cent) and Bauchi (19.52 per cent), while Kwara (13.96per cent), Abuja (12.96 per cent) and Cross River (12.22 per cent) recorded the slowest rise in headline Year on Year inflation.