*Inflation rate increases to 34.19%
Hardship has continued to take its toll on the citizens as prices of food items continue to rise beyond the each of an average citizen, amid low disposable income.
With official food inflation at above 40 percent and core inflation at over 30 per cent, Central Bank of Nigeria (CBN)’s anchor interest rate at 26.25 percent, economic activities are currently at their lowest ebb.
Confirming the development, National Bureau of Statistics (NBS) says Nigeria’s annual inflation rate has hit 34.19 percent in June 2024.
According to the report, the food inflation rate in June 2024 rose 40.87 per cent on a year-on-year basis, which was 15.62 per cent points higher compared to the rate recorded in June 2023 (25.25 per cent).
According to NBS’s report released on Monday, the June figure is 0.24 per cent higher than the 33.95 per cent recorded in May. The lowest figure in 2024 was 29.90 per cent, recorded in January.
Inflation had reached a 28-year high in May at 33.95 per cent, higher than 33.69 per cent recorded in the preceding month, representing an increase of 0.26 per cent.
So far in 2024, headline inflation has averaged 32.73 per cent, compared to about 22.25 per cent in the first six months of 2023 and 24.52 per cent for the entire year 2023.
On a year-on-year basis, the headline inflation rate was 11.40 per cent points higher compared to the rate recorded in June 2023, which was 22.79 per cent.
“This shows that the headline inflation rate (year-on-year basis) increased in the month of June 2024 when compared to the same month in the preceding year (i.e. June 2023),” the NBS said.
The bureau also said on a month-on-month basis, the headline inflation rate in June 2024 was 2.31 per cent, which was 0.17 per cent higher than the rate recorded in May 2024 (2.14 per cent).
This, it said, means that in the month of June 2024, the rate of increase in the average price level is higher than the rate of increase in the average price level in May 2024.
Experts have attributed the persistent rise in inflation to the ongoing structural challenges in agriculture, including insecurity in food-producing regions, high transportation costs, and the continuous depreciation of the naira.
They identified some of these challenges to include the infestation of tomato leaves which led to higher prices for staples like tomatoes and yams during the month.
Additionally, increased demand during celebration at festivities as well as rising importation costs are contributory factors to the elevated food prices in June 2024.
“Over the past year, food prices in Nigeria have soared, driven by factors such as supply chain disruptions, currency depreciation, insecurity and the impact of climate change on agriculture. This has led to prices of basic staples like rice, beans, and vegetables becoming increasingly unaffordable for the average Nigerian, stretching household budgets to their limits.
“The food index constitutes over 51 per cent of the inflation basket, and this escalation can be attributed to rising prices in fundamental food commodities, including bread, cereals, oil, and fat,” an analyst said
Following the development and the commitment of CBN to fighting inflation through hawkish stance on the monetary policy rate, (MPR), the CBN’s Monetary Policy Committee meeting coming up this month may be forced to further review upward the rate, a development that could adversely affect the companies operating below capacity utilization and may lead to closure of more.
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CBN governor,Yemi Cardoso, had persistently maintained that the members of the MPC will keep the rates high to tackle inflation.
At a recent event, Cardoso said, “The MPC is not oblivious to the fact that the country does need growth. If these hikes hadn’t been done at the time, the naira would have almost tipped over, so it helped to stabilise the naira. Interest rates are not set by the CBN governor but by the MPC committee composed of independent-minded people. These are people not given to emotion but to data. The MPC clarified that the major issue is taming inflation, and they would do what is necessary to tame it.”
Since the beginning of the year, the MPC has raised the MPR by 650 basis points, bringing the rate to 26.25 per cent as of May 2024. The MPC is due to meet later this month
However, some of the analysts expressed optimism that the relatively stable naira exchange rate on the NAFEM window during the period, may sway rhe thinking of the MPC Members for a break, possibly to review effects of the previous actions on the economy.