Nigeria’s inflation narratives took a controversial twist yesterday as the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), gives its own figure contradicting that of the National Bureau of Statistics, NBS, by a wide margin.
The NBS had released its Consumer Price Index, CPI, for June 2024 reporting that headline inflation rate increased by 0.24 percentage points to 34.19 per cent in June from 33.95 percent in May.
But when contacted by Vanguard for his comment, the President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Kelvin Oye, simply said, “Inflation is over 90 percent”, without giving further details.
Giving its own details NBS, also said that food inflation grew to 40.87 percent in June from 40.66 percent in May 2024 due to increase in the prices of millet whole grain, garri, guinea corn, etc (bread and cereals class), yam, wateryam, cocoyam, potatoes, yam & other tubers class, among other food items.
Meanwhile, financial analysts said the NBS’ figures outstripped both the individual and consensus forecasts.
NBS stated: “In June 2024, the headline inflation rate increased to 34.19 percent relative to the May 2024 headline inflation rate which was 33.95 percent.
“Looking at the movement, the June 2024 headline inflation rate showed an increase of 0.24 percentage points when compared to the May 2024 headline inflation rate.
“On a year-on-year basis, the headline inflation rate was 11.4 percentage points higher compared to the rate recorded in June 2023, which was 22.79 percent.
“This shows that the headline inflation rate (year-on-year basis) increased in the month of June 2024 when compared to the same month in the preceding year (i.e. June 2023).
“The rise in Food inflation on a year-on-year basis was caused by increases in prices of the following items: Millet Whole grain, Garri, Guinea corn, etc (Bread and Cereals Class), Yam, Water Yam, Coco Yam (Potatoes, Yam & Other Tubers Class), Groundnut Oil, Palm Oil, etc (Oil & Fats Class) and Catfish Dried, Dried Fish-Sadine, Mudfish (Fish Class), etc.
According to NBS, in June food inflation on a year-on-year basis was highest in Edo (47.34 percent), Kogi (46.37 percent), Cross River (45.28 percent), while Nasarawa (34.31 percent), Bauchi (34.78 percent) and Adamawa (35.96 percent), recorded the slowest rise in food inflation on year-on-year basis.
Monetary policy is failing- Adonri
Reacting, David Adonri, Analyst and Executive Vice Chairman at Highcap Securities Limited, said : “Despite all the measures taken by CBN, inflation rate continues to rise. Continued application of monetary policy to tackle this kind of stubborn inflation is failing because what is required is not demand management but supply side fiscal policy.
“Should the monetary authority react by hiking interest rate again, it will further increase yield on debt and cause financial assets to migrate more to debt. This may harm ongoing recapitalization exercise of banks. Rising inflation is not good news for equities.”
Commenting on the further rise in inflation, analysts at Comercio Partners said: “Looking ahead, food inflation, the main driver, is expected to taper off because of the short-term federal government’s recent interventions, with a N2 trillion packages announced by Abubakar Kyari, the minister for Agriculture and Food Security, to curb rising prices and speed up stabilization and growth.
“Also, a 150-day duty-free import window has been approved, allowing tariff-free importation of maize, husked brown rice, wheat, and cowpeas through land and sea borders. This measure, with imported commodities subject to a Recommended Retail Price (RRP), aims to provide immediate relief.
“However, tackling food inflation long-term means addressing underlying issues like transportation and logistics challenges, harvest losses, and regional insecurity. Moreover, discussions around raising the minimum wage could further fuel inflationary pressures.
“On the monetary front, recent interest rate hikes have helped combat inflation, but another hike seems unlikely because of tight macroeconomic environment.
“However, a focus should shift towards addressing the root causes of inflation without stifling economic growth.”
Also commenting, analysts at CardinalStone Finance stated: “The June CPI data indicated that inflation leapt by 24 bases points (bps) to 34.2% YoY, missing analysts’ average consensus of 33.94% and our projection of 33.90%. “Our tamer inflation expectation, based on the stability in the foreign exchange (FX) market was overshadowed by a more pronounced food inflation.
“We perceive that the food basket is still grappling with an uptick in input costs and persisting insecurities in the review period, thus propping up prices.
“The outlook for July’s inflation is likely to be mixed on the back of multiple factors. On upside risk, we expect the recent PMS scarcity and another electricity tariff hike for ‘Band A’ users to increase price pressure.
“Furthermore, FX volatility will likely be prevalent in July, stemming from increased FX demand for vacation and payment of foreign tuition fees.
“While these highlighted factors are expected to increase inflationary risk, we anticipate the base effect to sufficiently moderate YoY inflation.
“Moreover, the government’s decision to suspend duties, tariffs, and taxes on the importation of certain commodities like Maize, husked brown rice, Wheat, and cowpeas for the next 150 days is expected to lead to lower food prices. “The government’s plan to import 250,000MT of Wheat and 250,000MT of Maize also bodes well for the food price outlook, providing a positive counterbalance to the inflationary risks. “Overall, we expect headline inflation to moderate by 50bps to 33.7%.
“In light of the above, we expect the monetary policy authority to maintain its hawkish stance and hike the policy rate by 50 to 100bps in its July meeting”.
In his own comment Clifford Egbomeade, Public Policy Analyst and Communication expert, said: “The rise in Nigeria’s inflation rate to 34.19% in June 2024 has several significant implications for the economy. First, it reduces the purchasing power of consumers, making goods and services more expensive and diminishing the standard of living, particularly for low and middle-income households. This increased cost of living can exacerbate economic hardship and potentially push more people into poverty.”
“High inflation also creates economic uncertainty, which can deter both local and foreign investment. Investors are likely to be cautious in such an environment, leading to reduced investment and slower economic growth. “Moreover, the Central Bank of Nigeria (CBN) may be compelled to further raise interest rates to control inflation, which increases borrowing costs for businesses and consumers, potentially further slowing down economic activities.
“To address rising inflation, the government and the CBN should consider a combination of monetary and fiscal measures. Tightening monetary policy can help curb excessive money supply, although this must be done carefully to avoid stifling economic growth. Implementing prudent fiscal policies, such as reducing fiscal deficits and improving tax collection, is also crucial. Investing in supply-side interventions, such as supporting local production and reducing import dependency, can help stabilize prices in the long run”.
[Vanguard]
