As Nigerians continue to take stock of the outgoing year, one thing that is clear is that consumers experienced frustrations throughout the year as ‘positive’ inflation readings as claimed by the Central Bank of Nigeria (CBN), seemed to have left them worse than the previous year.
Apart from the fact that Nigeria’s inflation trend is at variance with global and regional inflation, realities on ground as per prices of goods and services are completely at variance with the readings from the nation’s Bureau of statistics, (NBS).
The implication is that, more Nigerians are being impoverished, with low purchasing power and dwindling fortunes of the local currency.
This is in spite of huge amount of dollars spent on defending the naira by CBN.
Not even the large mouthed interventions in the various sectors of the economy by CBN have yielded the desired results.
What Nigerians may be expecting, going by recent direct involvements of CBN in farming, is the amount of grains that we should be expecting from the regions that are said to be benefitting from the largesse.
Although, it was gathered that some of the loans given out may have gone down the drain due to the high level of insecurity.
Also, economic policy vagueness and regulatory autocracy may have plagued the Nigerian economy for most of 2021.
According to Bismarck Rewane, chief executive of Financial Derivatives Company, (FDC) in the current edition of Lagos Business School publication, the outgoing year was “a year best described as in like a lion, and out like a lamb. But in reality, it was almost the opposite because of mixed signals.”
For instance, NBS, said that the annual inflation rate dropped for the seventh consecutive month to 15.4 per cent in November from 15.99 per cent in October.
This represents a 2.77 percentage point decline since March when the inflation rate peaked at 18.17 per cent.
NBS disclosed this in its Consumer Price Index report for November 2021.The report stated, “Consumer price index, (CPI) which measures inflation increased by 15.40 percent (year-on-year) in November 2021. This is 0.51 per cent points higher than the rate recorded in November 2020 (14.89) percent. Increases were recorded in all COICOP divisions that yielded the Headline index.“
On a month-on-month basis, the Headline index increased by 1.08 per cent in November 2021, this is 0.10 percent rate higher than the rate recorded in October 2021 (0.98) per cent.
Also, the percentage change in the average composite CPI for the twelve months period ending November 2021 over the average of the CPI for the previous twelve months period was 16.98 percent, showing 0.02 percent point from 16.96 percent recorded in October 2021.
According to NBS, “The urban inflation rate increased by 15.92 per cent (year-on-year) in November 2021 from 15.47 percent recorded in November 2020, while the rural inflation rate increased by 14.89 percent in November 2021 from 14.33 per cent in November 2020.
“On a month-on-month basis, the urban index rose by 1.12 per cent in November 2021, up by 0.10 the rate recorded in October 2021 (1.02) percent, while the rural index also rose by 1.04 percent in November 2021, up by 0.09 the rate that was recorded in October 2021 (0.95) percent.
“The corresponding twelve-month year-on-year average percentage change for the urban index is 17.55 per cent in November 2021. This is higher than 17.53 per cent reported in October 2021, while the corresponding rural inflation rate in November 2021 is 16.42 percent compared to 16.39 percent recorded in October 2021.”
But our investigations also showed that prices of food items, in particular, have been on the rise with standard of living of most Nigerians, particularly, the lower class getting worse.
Although, there seems to be slow and steady economic growth during the year, lack of synergy between fiscal and monetary policy measures and the pandemic and particularly Omicron, seem to have interrupted the growth trajectory.
According to Rewane,
“This notwithstanding, Nigerians are still frustrated with data that shows falling inflation in an environment of higher prices.“
More worrisome, according to some analysts is the fact that major global economies are recording spikes in their inflation rates as supply shortages and high energy costs continue to filter into consumer prices while reverse is the case in Nigeria.
For instance, the US and UK recorded high levels of inflation, with the US’ inflation jumping to a 39-yr high of 6.8% while the UK spiked to a 10-yr high of 5.1%.
This has prompted a 15bps increase in the MPR by the BoE, while the US fed plans to increase rates thrice in 2022.
The impact of the hawkish monetary stance by developed economies will weigh on the debt service cost of emerging and frontier markets such as Nigeria.
This is because the likely monetary policy tightening in advanced economies could trigger capital flow reversals in Nigeria.
This could resulting in currency weakness and increased debt service burden
According to the analysts,Nigeria could experience another record slump in fiscal revenue due to lower oil receipts, a decline in remittances and subdued economic activities
