The continued depreciation of local currency, with alarming exchange rate between N565/7 to the dollar, is taking its toll on the consumers who are grappling with hunger and extinction.
Consequently, the deceleration in the headline inflation and recent rise in the gross domestic products, have become meaningless to consumers.
Specifically, while the continued moderation in inflation can be largely attributed to base year effects due to decline in annual inflation in all baskets, the monthly sub-indices have continued to increase.
The implication is that the development is suggestive of the fact that naira’s poor showing against other international currencies at the foreign exchange market is being transmitted into the domestic market where the poor continue to experience increased prices of products, particularly, food stuffs on daily basis.
Secondly, manufacturers whose major components are sourced from abroad are on the endless queues for the elusive dollars.
The low hanging fruits for some fortunate and oppressive Nigerians is that some people and corporate entities are saving their fortunes in dollars as a preferred store of value.
Besides enhancing their status and the attendant emergence of ‘sudden’ millionnaires, the ‘new wealth’, according to some of them is safer, convenient and profitable to hoard because of the dwindling fortunes of the naira, especially in the parallel forex market.
Besides enhancing their status and the attendant emergence of ‘sudden’ millionnaires, the ‘new wealth’, according to some of them is safer, convenient and profitable to hoard because of the dwindling fortunes of the naira, especially in the parallel forex market.
Indeed, the rush for the dollar and other factors have further exacerbated the pressure on the naira.
Consumers’ problems are being compounded by the false impression of benign inflation rate, supported by the base year effect, when in actually sense, daily or monthly experiences show impoverishment and human value reduction.
According to Bismarck Rewane, Chief executive of the Financial Derivatives Company in the current FDC Economic Bulletin, the current crisis in the foreign exchange market might lead to a spark in inflationary pressures.
“The increase in monthly inflation suggests that naira weakness in the forex basket is being transmitted into domestic prices. Most manufacturers claim they are only able to source about 10% of their forex demand from official sources. With the autonomous rate at record lows of N562/$, the blended rate has depreciated by 13.5% to N547/$ from N482/$ in June. This means that headline inflation might be approaching a point of inflection, which will translate into higher inflation in September/October.“
Looking at the economic outlook, the foremost economist said, “Inflation is expected to continue its downward trend in the near term but risks remain elevated due to
heightened insecurity in some of the food producing states (which could limit the impact of the harvest),
exchange rate pass through and higher energy costs especially with the imminent removal of fuel subsidy.
The continued moderation in inflation and the spike in Q2 real GDP growth will empower the doves in the
MPC to fight for a reduction in the MPR as a complement to the fiscal stimulus efforts of the FGN.“