Consumer Price Index (CPI), which measures inflation, increased by 16.47 per cent, (Year-on-Year) in January 2021 as reported by The National Bureau of Statistics (NBS).
This was 0.71 per cent points higher than the 15.75 per cent recorded in December 2020.
Nigeria’s inflation rate at 16.47 per cent in January 2021 makes it the highest since May 2017.
The inflation rate in urban areas of Nigeria grew by 17 percent in January 2021compared to January 2020. The inflation rate in rural areas increased by 15.9 percent in January 2021compared to January 2020.
“Core inflation, which captures prices of non-food commodities and services, rose to a three-year of 11.85 per cent in January 2021, buoyed by price increase in housing, water, electricity, gas, and other fuel component and transportation component. The Naira exchange rate depreciation and the forex liquidity challenges were also major drivers of core inflation pressures.”
A breakdown of the statistics released showed food inflation at 20.57 per cent. This was the highest since 2009. Consumers would hardly contest the statistics even if they would contest any.
In 2020, Nigeria recorded one of the highest inflation rates worldwide. The release of January 2021 would have sustained the position.
Reasons had been adduced for the skyrocketing inflation rate in different quarters.
The Lagos Chamber of Commerce and Industry (LCCI) reasoned that weak productivity in the agriculture sector and increased cost of agricultural inputs are some of the major factors responsible for the increase in January inflation rate.
The weak productivity in the agriculture sector and increased cost of agricultural inputs are the reflections of insecurity in the land.
It is on record that both local and international organizations warned of impending famine as a result of insecurity in Nigeria.
It is a situation where farmers cannot go to farms either to produce for their consumption or sell to earn income to sustain their standard of living.
Other factors that could have been responsible for the core inflation as explained by The LCCI Director General are Naira exchange rate and foreign exchange liquidity concerns, higher energy costs and uptrend in the financing of fiscal deficit by the Central Bank of Nigeria (CBN) through facility.
Some explained that the rise in the inflation ratecan also be attributed to shut down of economy due to Covid-19.
Other believed that closing of borders for those numbers of months contributed to the skyrocketing inflation rate.
Increase in electricity tariff which the Advocate propounded would stabilize supply of electricity looked like dummy as consumers had not experienced such stability. This increased the cost of production and living.
MAN pointed out the implications of the rise in the inflation rate with its concomitant effect on the envisaged recovery of the manufacturing sector, the high cost of living and the disposable income of the average Nigerian and the resulting weak consumer spending which will worsen the high stock of unplanned inventory that the manufacturing sector was confronted with.
LCCI on its part explained that consistent rise in domestic prices will affect negatively the entrepreneurs and the larger investing community as higher prices translate to increased production costswith consequent impact on the manufacturing companies’ bottom-line.
LCCI also believed that “Rising food prices would see most low and middle-income households spend more on food commodities, with little amount to save and/or invest.”This would worsen Nigeria’s poverty situation.
LCCI said that high inflation will“deepen negative real returns on investment securities such as treasury bills, bonds and others, even as yields on these instruments are unattractive relative to emerging market peers.”
This is understandable when the rate of inflation is compared to rate of interest.
There is no doubt that high inflation will worsen the unemployment problem in Nigeria.
LCCI proffered solutions to the skyrocketing inflation rate in Nigeria.
The LCCI believed that the issue of security should be addressed, logistics costs should be eased, foreign exchange market should be stabilized, port challenges and related bottlenecks must be resolved and there must be strict adherence to the statutory limit of CBN overdrafts to the government.
These suggest that high inflation rate problem can be tackled if Nigerian Government sees reason for tackling it.
Tackling it will improve the welfare of citizens and probably reduce the agitations in the land.