NBS Inflation Figures Don’t Reflect Economic Reality- Uwaleke
Nigeria’s inflation has become worrisome for consumers, businesses and even investors as experts are beginning to fault official figures which may not reflect market reality.
Before the index case of Covid-19 pandemic in the country in February 2020, inflation was just 12.2 per cent.
But in 2021, the concerns of skyrocketing prices especially the food component has almost exceeded the fears of contracting the pandemic for average Nigerians experts suggest.
Data on prices released by the National Bureau of Statistics for June showed inflation has dropped to 17.75 per cent from 17.93 per cent in May 2021.
“It is difficult to interpret this marginal drop in headline inflation since April this year to mean a sustainable downward trend in inflation rate. This is because the risks to inflation outlook are still present,” Prof. Uche Uwaleke, President of the Association of Capital Market Academics told THE WHISTLER.
Inflation rose from 16.47 per cent in January to 17.33 per cent in February, 18.17 per cent in March, while it began to plunge in April to first 18.12 per cent and 17.93 per cent in June.
Food prices has been the key driver of inflation as it had hit 22.28 per cent in May, but it dropped to 21.83 per cent.
Uwaleke said, “It is also possible the marginal drop in food inflation to 21.83 per cent in June may not reflect actual drop in basic food prices,” adding “but arising from the ‘base effect’ associated with the methodology of computing CPI on a year on year basis.”
Nigeria’s security threat in the Northern region has been linked to the cause of worsening food prices.
Uwaleke said, “Insecurity which directly impacts food inflation, the recent devaluation of the naira and the likely hike in pump price of fuel and electricity tariffs,” which are the major drivers were still prevalent.
Recently, Financial Derivatives Company projected that inflation will exceed 18 per cent in June to reflect market reality.
The Capital Market Association boss said, “To appreciate the practical reality, one needs to consider price changes based on month-on-month.
“It is pertinent to note that Inflationary pressure is coming more from the food component at over 20 per cent reflecting legacy factors such as inadequate supply and transport challenges.
“Given that inflationary pressure has to do more with supply, I suggest the government and the CBN should scale up interventions in Agriculture with adequate monitoring and evaluation mechanisms put in place.
“The CBN should equally continue to ensure forex market liquidity to reduce exchange rate especially now that crude oil prices are relatively high.
“In order to increase food output, the need to tackle the seemingly intractable security challenge facing the country cannot be overemphasized.”