FG’s 2022 Target Shaky As Inflation Rises To 15.63%
The National Bureau of Statistics disclosed on Monday that Nigeria’s headline inflation rate rose to 15.36 per cent in December 2021.
Earlier data from the NBS showed that headline inflation had maintained a consecutive decline for a period of eight months, from April to November 2021.
However, the trend was broken in December when the inflation climbed by 0.23 points to 16.63 per cent, from 15.50 per cent recorded in November.
The Statistician General of the Federation, Simon Harry, on Monday during a press briefing in Abuja said, “However, it may interest you to note that this trend has been broken by the slight change in the month of December, 2021 as the inflation rate for all items (Headline Inflation) for the month increased to 15.63 per cent, year-on-year. This trend clearly shows an increase from 15.40 per cent recorded in the month of November, 2021 to 15.63 per cent in December, 2021. This is 0.23 per cent points higher than the rate recorded in November, 2021.”
He, however, said the development was a decline when compared to the corresponding month in 2020, which recorded 15.75 per cent.
He added that the change in the declining trend might have been caused by the increase in prices of goods and services driven by increased demand during the month under review, which was a festive season.
On a month-on-month basis, the NBS said that the headline index increased by 1.82 per cent in December, 0.74 per cent higher than the rate recorded in November, which was 1.08 per cent.
The urban inflation rate increased to 16.17 per cent (year-on-year) in December from 16.33 per cent recorded in December 2020, while the rural inflation rate increased to 15.11 per cent in December, from 15.20 per cent recorded in December 2020, which was lower by 0.09 per cent points.
The SG said that the composite food sub-index rose to 17.37 per cent in December, which was lower by 2.19 percentage points when compared to 19.56 per cent recorded in December, 2020.
He stated that the rise in the food sub-index was as a result of increases in prices of bread and cereals, meat, fish, potatoes, yam and other tubers, soft drinks, and fruit.
“On month-on-month basis, the food sub-index increased to 2.19 per cent in December, 2021, higher by 1.12 per cent points from 1.07 per cent recorded in November, 2021,” Harry added.
The NBS also disclosed that core inflation which excludes the prices of volatile agricultural produce stood at 13.87 per cent in December, 2021, which was higher by 2.50 per cent when compared with 11.37 per cent recorded in December, 2020.
On a month-on-month basis, the core sub-index increased to 1.12 per cent in December, 2021. This was lower by 0.13 per cent when compared with 1.26 per cent recorded in November, 2021.
The bureau added that the highest increases were recorded in prices of “gas, liquid fuel, wine, actual and imputed rentals for housing, narcotics, tobacco, spirit, cleaning, repair and hire of clothing, garments, Shoes and other footwear and clothing materials, other articles of clothing and clothing accessories.”
However, the increase in inflation rate after eight months of consecutive declines may be a potential threat to the Federal Government’s inflation target for 2022.
The Federal Government projects an inflation rate of 13 per cent in its key projections and assumptions for the 2022 budget.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had disclosed this during her presentation of this year’s approved budget recently.
She said, “Inflation is projected to be double-digit in the medium-term given structural issues impacting the cost of doing business, including high food distribution cost. However, the current steady decline is expected to be sustained, seeing the inflation rate drop to 13 per cent in 2022 and 10 per cent by 2024.”
Also, the World Bank had earlier disclosed that Nigeria might have one of the highest inflation rates globally in 2022, with increasing prices diminishing the welfare of Nigerian households.
According to the World Bank, Nigeria is also projected to have the seventh-highest inflation rate among Sub-Saharan African countries in 2022.
Reacting to the latest inflation figure, an economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said high inflationary pressures had been a major concern.
He said, “Although the economy witnessed an incremental deceleration in inflation over the past eight months before the reversal in December, high inflationary pressures remain a major concern to stakeholders in the Nigeria economy.”
According to him, the possible reasons for the increase in inflation rate are: surge in consumer spending driven by the December festivities, exchange rate depreciation, liquidity challenges in the forex market impacting adversely on manufacturing output, security concerns affecting agricultural output, high transportation costs, high energy cost, high import duty on intermediate goods and raw materials, among others.
On how the Federal Government could tackle the inflationary pressures, Yusuf said “To tame the current inflationary pressure, the government needs to fix the following: reform the foreign exchange market to stabilise the exchange rate and reduce volatility; address forex liquidity issues through appropriate policy measures; address the security concerns causing disruption to agricultural activities; address productivity issues in the real sector of the economy.”
He added that the government needs to “address the challenge of high transportation cost; reduce fiscal deficit financing by the CBN to minimise the incidence of high-powered money in the economy; manage climate change consequences to reduce flooding and desertification; ensure the restoration of normalcy and good order at the nation’s ports to reduce transaction costs; reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of the sharp depreciation in the exchange rate.”
He further urged the government to address concerns around high energy cost, and create an investment-friendly tax environment.