Prices of commodities have continued to skyrocket as a result of high inflation rates from 9.6 per cent in January to 12.8 per cent as at March. Despite the reduced prices of crude oil in the global market, Nigerians still buy Premium Motor Spirit (PMS), otherwise known as petrol, at doubled the price set by the Nigerian National Petroleum Corporation (NNPC).
The question that remains unanswered is when would the current fuel scarcity and foreign exchange crises be solved as they have contributed immensely to the current high inflation figures in the country?
According to the National Bureau of Statistic (NBS), the country is witnessing the highest inflation rate since July 2012. The consumer prices, particularly for food and commodity, have drastically increased following the jump of inflation from 11.4 per cent in February to 12.8 per cent in March.
NBS said: “The higher price level was reflected in faster increases across all divisions which add to the index with the exception of the restaurants and hotels division that increased, though at a slower pace for the second consecutive month. Transportation costs, the planting season, and foreign exchange movements created significant upward pressures on the food index in March. The food index increased by 12.74 per cent, up by 1.4 per cent points from rates recorded in February as all major food groups which contribute to the food sub-index increased at a faster pace.
“The knock-on effect of foreign exchange which has in turn affected the prices of imported food and non-food items, the importation of PMS and the adjustment in the national electricity tariffs have resulted in a surge of rates recorded by the ‘All items less Farm Produce’ or Core sub-index.”
Economic Confidential gathered that online retail firms such as Jumia, Konga, Yudala, among others, have prices of goods and services increased close to 40 per cent due to the forex market which has affected the importation of their goods and services.
Ordinarily, the Consumer Price Index (CPI) used to indicate 2.2 per cent every month. However, the current economic headwinds and fuel scarcity have contributed to the hike in prices of goods and services across the country.
There is a shift and, of course, a wide margin in the current prices of goods and services consumed by Nigerians; these include food, water, electricity, gas/PMS, non-alcoholic beverages, transportation, clothing and footwear.
The question is, when the prices of oil was high, Nigerians pay high price, why can’t Nigerians enjoy PMS as citizens of the largest producer and importer of crude oil in Africa?
Economic Confidential gathered that petrol is sold between N160 and N200 across the 36 states of the federation. Prices of goods and services are very high.
For instance, the price of fish has increased, and this same for flour, wheat, maize, water, and other consumables.
It is against this backdrop that President Muhammadu Buhari recently ordered national distribution of 10,000 tonnes of grains from the national strategic grains reserves to counter the hike in food prices.
In a statement issued by his Senior Special Adviser on Media and Publicity, Garba Shehu, the action of government is aimed at easing the hardship associated with increase in food prices. The current vandalism orchestrated by the Niger Delta militant on the pipelines has also impacted on almost all economic activities in the country, particularly in the power and petroleum sectors.
Reports have it that depot owners and marketers obstruct the smooth supply of PMS by selling above the regulated price of N86.50 per litre. A litre of petrol is apparently sold above N120 as against the ex-depot price of 76.50 per litre. Majority of the marketers are clamming that the high cost of sourcing forex would not allow them to sell at the regulated pump price.
Analysts have argued that the epileptic power supply has made many firms to close shop and left Nigeria to other promising Africa countries for their businesses. They noted that it has contributed to the increased level of unemployment and economic challenges across the nation.
The NBS indicated that industries fell by -2.24 per cent to contribute 23.71 per cent to the entire Gross Domestic Product (GDP), last year.
Analysts and the Trading Economics global macro-model 2016-2020 forecasts indicated that the Nigeria inflation rate would be 11.80 per cent at the end of first quarter and estimated a 12.10 per cent inflation rate for the country by the end of the year. By 2020, the nation’s inflation rate is projected to trend around 10.6 per cent.
Economists noted that business activities have continued to decline due to the challenges facing the nation’s economy. For instance, the Central Bank of Nigeria (CBN), in its March edition of Purchasing Managers Index (PMI), indicated that 11 out of 18 sub-sectors in the country witnessed declines – from finance and insurance to wholesale trade; construction; professional, scientific, and technical services; management of companies, utilities, real estate, food services, among others.
It said the food which is non-core inflation increased to 12.74 per cent compared to 11.35 per cent in February, while the core inflation of energy and other farm produce also rose drastically in the period under review.
Food which is the primary need of man has become a scarce commodity in Nigeria. The prices of rice, yam, tomato puree, fish, tomatoes, garri and other common food items have doubled in the market.
This writer observed that a bag of rice which previously sold for N10,000 is now sold between N14,000 and N17,000; a carton of fish that sold for N 6,000 now sells for between N10, 000 and N13,000; a bag of Semovita which was being sold for N900 is now selling at N1,500 and a tuber of yam is sold for N500 instead of the previous price of N250.
In the light of these, analysts have called on the government to declare a state of emergency over the incessant scarcity of fuel that has submerged the system to chaotic situation.
According to them, many households now find it difficult to put food on the table while those that can afford the current prices of food are paying through their noses. Stakeholders in the trade, industry, mines and agriculture sectors are of the opinion that there is the need to review the current monetary policy in the country, particularly due to the fall in the value of the naira, to help solve the issue of liquidity in the forex market.
The CBN Monetary Policy Committee has, due to the hyperinflation in the country, tightened the monetary policy by moving the benchmark interest rate to 12 per cent from 11 per cent and Cash Reserve Requirement to 22 per cent from 20 per cent.
Analysts also noted that the rising inflation is, however, not linked to excess liquidity in the banking industry, but to the value of the naira and tenacious fuel scarcity with its resultant consequence on prices of goods and services.
It is noteworthy that the resultant effect of the hyper-inflation is having double digit inflation figures throughout this year, even as the federal government has devised strategies to increase spending and invest more on infrastructure in the 2016 budget.