*Ghana Experiences Downward Trend
John Danjuma Omachonu
As the nation awaits the release of the August inflation figures, on Friday, September 15, by the nation’s Statistics Bureau, (NBS), analysts are again forecasting another increase to 25.47% for the month from 24.08% in July.
This will be the 8th consecutive monthly increase and the highest level in 18 years, should this happens.
The last time inflation got to this level was in August 2005.
With the prevailing multidimensional poverty and the fact that many Nigerians are living below a dollar per day, consumers struggling for survival will be further squeezed, contending with rising prices of goods and services and low purchasing power.
This is even as Ghana’s headline inflation rate declined to 40.1% in August, reaching a 10-month low to ease pressure on the central bank to keep raising borrowing costs.
According to reports from Bloomberg, this was the slowest rate of change since October.
The Government Statistician, Samuel Kobina Annim revealed that the annual inflation rate declined 43.1% in July to 40.1% in the latest data from the West African nation.
However, the ugly trend in Nigeria, ocassioned by the continuous rise in the inflation rate, poses challenges for the central bank’s monetary policy strategy and indicates key structural challenges in the African largest economy, particularly in areas such as food, housing and transportation.
This may be the major determinant of policy decision by the monetary policy committee (MPC) members, even as the available options are gradually thinning out, when they meet later this month on the policy options with particular reference to likely continuation with monetary policy tightening, focusing on reducing the money supply in the economy, and yields on fixed-income Securities, which are expected to rise in the short term.
The aggressive marketing of the FG bonds with higher rates, would mean, banks, exploring survival strategies and means to retain and possibly lure customers.
Should the inflation rise as being forecasted by the analysts happens, Bismarck Rewane, chief executive officer, Financial Derivatives Company, (FDC), for instance, says, “This will be the eighth consecutive monthly increase and the highest inflation level in 18 years.”
But, the twin effects of soaring inflation and burgeoning unemployment, despite the new methodology being introduced by the fedederal government that seems to create impression of less that 5 percent rate, are rapidly grooming a band of distressed consumers whose purchasing power has fallen to record lows.
In fact, the NBS’ latest Labour Force Statistics (LFS) report places Nigeria’s unemployment rate at 4.1% using the new methodology that includes any individual who has worked for at least one hour in a week as employed.
The illusion, according to Rewane, the data creates is that only 3 million of Nigeria’s 72 million working population is unemployed. In reality, 133 million people are multi-dimensionally poor, lacking the adequate income to meet their necessities.
The implication is that Nigeria’s working population faces the crisis of working poverty, a situation where the employed do not earn a living wage. An average Nigerian who earns the minimum wage of N30,000 and does not have any dependents will have to work 11 hours per day to escape poverty. If he has four dependents, he will need to work 57 hours per day to escape poverty.
In fact, Africa’s largest economy is going through a rough patch, typified by sluggish growth in fiscal revenues, bloated debt and currency weakness.
But, more worrisome is the fact that the contributory factors to inflation in Nigeria remain basically the same, including naira depreciation, higher logistics costs, money supply growth, and cost-push variables.
According to Rewane, “In the months of July and August, the Naira swung between N775/$ and N955/$ at the parallel market. The pass-through effect of a weak currency on domestic prices remains potent. Notable among the commodities that have high import contents are wheat, sugar, rice, and dairy products.”
Friday Ameh, Lagos based analyst believes that the current administration is yet to settle down due to many issues of survival, living and livelihood of Nigerians to consider, that may inadvertently contributing to rising inflation.
Other analysts say the current economic Indicators are distressing, while calling on economic managers to settle down quickly to tackle these issues decisively do as to avert the looming danger that could lead to some political, social and economic consequences .
According to them, the much desired coordination between the fiscal and monetary policy measures are yet to be fashioned out as the government is presently preoccupied with dishing out palliatives either as cash or materials, curiously purchased from the same markets, to distribute to the people.
According to Ameh, Whichever way, the ability of government to effectively tackle inflation at least in the medium term might be hampered unless the purposeful leadership being experienced is matched with effective supervision and coordination.
Rewane, in the current FDC Economic Splash, was categorical, saying CBN is likely to maintain its hawkish stance.
“This is political season in Abuja where political issues are more profound than economic reality. It is against this background that the MPC will meet on September 25-26. Prudent policymaking will suggest that a tightening is almost imminent whilst the political reality suggests otherwise. It is our view that a tightening at this time is almost inevitable,” he said.
The economist added that inflation is, however, not Nigeria-specific as it cuts across Sub-Saharan Africa (SSA)
Some of the SSA countries recorded higher inflation rates, owing primarily to currency weakness and increasing energy costs.
For instance, in August, the Zambian Kwacha depreciated by 6.69% to K20.26/$, pushing inflation to a 17-month high of 10.8%; Angola’s inflation also increased for the third consecutive month to 12.12% in July, largely due to the reduction in fuel subsidies.