The increase in the prices of food items, which dragged the nation’s core headline inflation to 14.23% in October, up from 13.71% in September, will compound the poverty level among Nigerians.
Among the worries, according to two professors of economics, finance, and capital market, is that the increase will erase the purchasing power of many people, particularly the downtrodden.
The National Bureau of Statistics (NBS), the country’s official data agency, yesterday said the October 2020 Consumer Price Index (CPI), which measures inflation, increased by 14.23 per cent (year-on-year). The rise represents 0.52 per cent, compared to the rate recorded in September 2020 (13.71 percent).
According to NBS, the composite food index rose by 17.38 per cent in October 2020 compared to 16.66 per cent in September 2020.
The agency explained that the rise in the food index was caused by an increase in prices of bread and cereals, potatoes, yam, and other tubers, meat, fish, fruits, vegetables, alcoholic and food beverages, and oils and fats.
Reacting to the new price regime in the country, Professor Emeritus and former Director-General of the Nigerian Institute for Economic and Social Research (NISER), Olu Ajakaiye, described the development as unfortunate because of its negative impact on the citizens. He, however, said it was expected.
“The rising inflation is to be expected following increases in costs of universal intermediates like the pump price of petrol and electricity tariff. These are on top of the usual structural challenges of poor infrastructure and highly import-dependent production and consumption system in an environment of exchange rate depreciation.
“The common persons will have to endure more difficulties in meeting their basic needs, and the poverty rate may increase at least in the short to medium term. The lack of fiscal space suggests that the government may not be able to do much in the short run. The complementary monetary policies may help somewhat. I will not be surprised if the economy goes into recession with the second wave of COVID-19 in Europe and the US because of the indirect effects on oil price and oil export,” the economist said.
He hoped that the efforts to upgrade infrastructure by the government would be speeded up so that real economic diversification will be manifest in the medium to long term so that the growth drivers will be endogenous, thus insulating the economy from negative external shocks.
Similarly, Uche Uwaleke, a finance and capital market professor of the Nasarawa State University, Keffi, blamed the continued rise in inflation figures in the country on the closure of the borders and COVID-19 lockdowns.
“The effect of COVID’19 on the economy still lingers, especially from supply chain disruptions. It is no surprise that headline inflation has continued to rise with the NBS October number coming in at 14.23 per cent up from 13.71 per cent in the previous month.
“Contributory factors include the border closure, increase in VAT, and implementation of stamp duty as well as the high exchange rate, especially in the parallel market. The increase in the pump price of fuel also contributed because, according to the NBS, a major cause of core inflation came from an increase in transport cost.”