The latest inflation statistics from the National Bureau of Statistics (NBS) show a record high of 18.3 percent in October 2016. The figure is a 0.4 percentage increase from the 17.9 percent recorded in September. It is the highest recorded in eleven years. This is an ominous signal for the Nigerian economy that is currently in recession.
According to the NBS Consumer Price Index (CPI) released last week, rising prices of essential food items such as bread, fish and cereals, as well as expenses on rent, school fees, kerosene, electricity, water, and transportation, among others, are key indicators that pushed inflation rate in October.
The NBS says the figures show that most families in the country are currently under intense pressure. It also noted that food and utilities are expenditures that families cannot do without. The report explains that if prices are going up and family incomes remain stagnant, it means many families are falling into the poverty trap.
In addition, the statistics reveal that most vulnerable members of the society are under unprecedented pressure as the prices of basic items have hit the roof in the country. One thing is certain from the NBS data: the report may not have fully captured the true extent of the change in prices of goods and services because a lot would have happened between the time NBS collected its data and the time it released the information last week. And inflation actually measures the average change in the prices of goods and services. Based on this, we believe that the current rate of inflation could be higher than the NBS reported.
All the same, the continuous headwinds in inflationary trends since the beginning of this year should be a matter of serious concern to both the Federal Government and the Central Bank of Nigeria (CBN). For instance, since April this year, inflation rate has risen from 13.7 percent, to the current rate of 18.3 percent. By all standards, this is a dismal record in the management of the economy. It means that Nigeria’s economy has grown progressively worse. It also reflects poor performance in other economic indicators such as unemployment rate and instability in the value of the naira.
The unfortunate inflationary environment suggests that our economy is at a crossroads and needs urgent measures to arrest its drift, address the high cost of essential food items, the depreciating value of the naira against major foreign currencies and the high interest rate regime. Other problems that need urgent attention are the trade deficit with other countries, the neglect of made-in-Nigeria goods and militancy in the Niger Delta region that has adversely affected Nigeria’s oil production. Besides, our Gross Domestic Product (GDP) has declined significantly, productivity has fallen, and recession is hurting every sector of the economy.
It is important that the latest NBS data on inflation came out a few days before the quarterly Monetary Policy Committee (MPC) meeting of the CBN taking place this week in Abuja. Nigerians are eagerly waiting for the response of the apex bank to these concerns. Interest rate and foreign exchange challenges are two areas in which many expect definitive monetary policy responses from the CBN.
The economy requires a reasonable cut in interest rate so that business operators can obtain credit with ease. Manufacturers who have been hard hit by the present high interest regime look forward to a downward review of the existing 14 percent Monetary Policy Rate (MPR), otherwise known as lending rate, which was fixed in September. High interest rate will further hurt the economy and exports.
Altogether, the economy needs a sound economic team, as well as responsive monetary and fiscal policies to correct the structural deficiencies that have raised the cost of doing business and resulted in high prices of goods and services, profitability losses and layoffs by many companies. High inflation is one critical problem the present administration must tackle vigorously if it must spur investment and increase public confidence in the country.
