..Will drop in four months –CBN
Emeka Okoroanyanwu and Babajide Okeowo
Nigerians will be paying more for consumables this Yuletide, as inflation rate has risen to a 17-month high of 11.61 per cent in just one month. This is even as consumer inflation dropped to its lowest in almost four years, showing that the purchasing powers of Nigerians are fast declining. Thus, worrying signals are fast emerging from stakeholders and experts in the economic sector with many unanimous that this is not unconnected with the recent border closure in Nigeria.
In the October inflation figure released by the National Bureau of Statistics (NBS), inflation rose to 11.61%, representing a 17-month high.
A separate food price index showed inflation at 14.09% in October, compared with 13.51% a month earlier. This rise in the food index was caused by increases in prices of meat, oils and fats, bread and cereals, potatoes, ham and other tubers, fish and vegetables, the statistics office said in its report.
Year-on-year, food inflation was the sharpest in one and a half years (14.09 percent vs 13.51 percent in September), mainly reflecting food shortages caused by the ongoing border closure ordered by President Muhammadu Buhari to avoid smuggling of rice and other commodities.
The country has been recording consistent rise in inflation over the past ten months. The situation was worsened by the recent closure of border by the Federal Government, which explained that the action was aimed at checking the smuggling of food items, such as rice, fish and pineapples into the country.
On a monthly basis, consumer prices went up by 1.07 percent, after rising 1.04 percent in the preceding month.
Nigeria’s inflation rate rose to 11.37% in April from 11.25% recorded in March 2019, NBS had reported said. The bureau, in its “CPI and Inflation Report’’ for that month said the figure was 0.12% points higher than the rate recorded in March 2019 (11.25%)
READ ALSO: http://INEC declares Smart Adeyemi winner of Kogi West Senatorial poll
According to NBS, the percentage change in the average composite CPI for the twelve months period ending April 2019 over the average of the CPI for the previous twelve months period was 11.31per cent, showing 0.09 per cent point from 11.40 per cent recorded in March 2019.
The consumer price index (CPI) examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care in an economy. The effect of inflation on the economy can only be imagined. As inflation rises, businesses are forced to raise prices even as banks are forced to raise interest rates in order to maintain a profit margin and higher rates means that marginal businesses will fail, thus increasing unemployment and harming the overall economy.
All items states inflation rate
In October 2019, all items inflation rate, on year on year basis was highest in Kebbi State, about 15.20%, Bauchi (13.97%), Ondo (13.74%), while Kwara (9.69%), Katsina (9.29%) and Bayelsa (9.07%) recorded the slowest rise in headline year on year inflation rate.
On month on month basis, however, October 2019 all items inflation rate was highest in Benue (2.20%), Bauchi (1.87%) and Cross River (1.80%). Anambra recorded the slowest rise at 0.28%, while Bayelsa and Ebonyi saw decline in the headline month on month index by -0.13% and -0.35% respectively.
Food inflation
In October 2019, food inflation rate on a year on year basis was highest in Kebbi (17.53%), Ondo (17.01%) and Ogun (17.00%), while Kogi (12.12%), Katsina (11.18%) and Bayelsa (9.55%) recorded the slowest rise.
On month on month basis however, October 2019 food inflation rate was highest in Oyo (2.56%), Osun (2.52%) and Lagos (2.05%) while Enugu (0.24%) and Abuja (0.14%) saw the slowest increases in month on month food inflation rate.
Bayelsa State at -0.35%, recorded price deflation or negative inflation, that is, a decrease in the general price level of food or a negative food inflation rate.
The Central Bank of Nigeria (CBN) said the rise in inflation is not unconnected with the recent closure of the borders.
“Inflation went up from 11.22 to 11.61 between September and October, and mainly it’s because of the border closure” the CBN Governor, Godwin Emefiele, agreed immediately after the reports were released.
Inflation is the increase in the prices of goods and services over time. It increases the cost of living and reduces the purchasing power of each unit of currency. As prices rise, money buys less. Inflation rate is the percent increase or decrease in prices during a specified period. It’s usually over a month or a year. The percentage tells how quickly prices rose during the period. For example, if the inflation rate for a litre of petrol is 2 percent a year, then petrol price will be 2 percent higher next year. That means a litre that costs N145.00 this year will cost N154.04 next year.
The National Bureau of Statistics uses the Consumer Price Index to measure inflation. The index gets its information from a survey of thousands of businesses. It records the prices of thousands of consumer items each month. The CPI will inform you of the general rate of inflation.
Stakeholders point accusing fingers at border closure
Different stakeholders in the country have, however, posited that the negatives of the border closure far outweigh the benefits.
Chief Executive Officer of Multimix, said the minuses far outweighed the benefits while positing that it will be inimical for the country to continue to shut its border.
“If we step back a little to look at the consequences, the plusses and the minuses on Nigeria as the country, which initiated the closure, there might be some gains from the exercise, but there is a lot of minuses. The cost of food prices has gone up which has pushed inflation to its highest since May 2018. It will be wrong for anyone to say the border closure did not achieve anything while it will also be very wrong for anyone to advocate that the border be closed forever, it only depends on which divide the person is on,” he said.
He also expressed reservation that the border closure would threaten the recent Africa Continental Free Trade Agreement, AfCFTA agreement which Nigeria recently appended her signature to.
“This will also threaten the AfCFTA agreement and is capable of sending a wrong signal that any country can just wake up one day and just shut her borders cannot be taken seriously. Not only that, he laments that exports from Nigeria have also been affected within the Economic Committee of West Africa State, ECOWAS region because those other countries are not just going to welcome your goods with open arms when you have closed your borders. Isn’t there a better way of handling this? Is border closure the best option? Rather, a strong Customs Service is the best way to go. Technology is another way to go,” he asserted.
Similarly, to Obi Ozor, CEO of Kobo360, a tech-enabled digital logistics platform, the effect of the border closure is detrimental to the economy.
“Border closure has been very detrimental not only to inflation but to the business environment especially Small Medium Enterprises, SMEs. On our platform, we saw a 42% decline in volumes of trade carried out on the SME segment of the platform while we recorded a 36 percent decline in business on the enterprises’ segment of the platform. What this means to us is that since Kobo platform basically powers trade and commerce, it shows us that the economy is actually depressed because of the border closure,” he said.
Also, Kayode Akindele, Partner at TIA Capital posited that while the intention of government might be good, but it will be inimical to the Nigerian economy.
“I can understand where the Nigerian government is coming from, but there comes a time when it will be inimical to the Nigerian Economy if we continue to close our land borders. We are suffering more than we are gaining from this policy, government should rather look at the fundamental issues that are driving the business of smuggling which is the weakness of our institutions, if our institutions are strong, we would not have reasons to close our borders,” he said.
On his part, James Sagabamah a retired director with the CBN, said Nigeria did not do her homework before closing her borders which is now affecting the country.
“The bottom line is that Nigeria as a country did not do her homework properly before closing the border. You must plan, but in this case, the planning was not sufficient. Take, for example, our consumption of rice is at about 6.7million metric tonnes while our production is just about 3-4m metric tonnes, how do you address this shortfall since governance is all about the people? The best option would have been to continue planting rice and have enough in storage and push it to the market before closing the borders, this way the effect will not be this intense. But, since we do not even have enough, there will be a shortage, and as an effect, prices will now spiral out of control. We need to take care of the domestic economy before taking any step,” he said.
Border closure not the solution –Experts
According to Johnson Chukwu, MD/CEO of Cowry Asset Management the closure of the border is not a permanent solution but an indictment on the Nigeria Customs Service who has failed in its mandate.
READ ALSO: http://Sokoto gov. flags-off 1.5m capacity water scheme in Tureta
“This is not the permanent solution to the issue of smuggling which necessitated the closure of the border in the first place. The major issue we should be addressing is the ineffectiveness of the NCS, the agency which is supposed to regulate the importation and exportation of goods into the country is not alive to its responsibilities, for me, this is not a permanent solution.
The only reason we are closing the borders is that the Customs has failed to discharge its duty effectively and we need to address that. If we think that the border closure is the solution, what happens two years down the line when the AfCFTA comes into effect? We need to examine the bureaucratic failure of the NCS to discharge its duties” he said.
According to Vincent Duruji, the closure of the border and the attendant ban on food importation is ill-conceived while proffering solution to the issue.
“The ban on importation of food of any kind in Nigeria is ill-conceived. To place a ban on any product, you must first provide an alternative product at an affordable price. Nobody will be against the consumption of local rice by Nigerians if the policy was carefully managed from one stage to another. Below should be in place before this unacceptable ban. There is a need to educate the local farmers on how to produce good quality rice at affordable price, there should also be the provision of low interest loans for qualified local rice farmers, monitor these farmers and provide assistance when needed, provide machinery and logistics for standard rice productions, buy the excess rice produced by the farmers to make sure the business remains encouraging for farmers and build standard rice processing facilities in all rice-producing states. With this approach in place, the force of demand and supply will stabilise the Nigerian rice market. Even at that, we still don’t need an outright ban on rice importation. The government at that point can only tax imported rice heavily. The local consumers will now decide either to buy high-quality Nigerian rice at the cost of N10,000 per 50kgs bag or heavily taxed foreign rice at the cost of N25,000 for the same 50 kg bag of rice. We must always reflect soberly from both sides before churning out ill-conceived policies for the masses of this country” he said
Inflation will drop in another three to four months –CBN
However, Emefiele has expressed his optimism that this inflation will be temporary and will go down in another three to four months.
“I don’t like the fact that prices went up momentarily from September and October, but the beneficiaries are Nigerians and companies where we have seen a situation where people have jobs, farmers who produce poultry and those benefiting from import of cars legitimately. In as much as I do not like the fact that inflationary pressures are coming up right now, I’m also saying that it will moderate and very quickly, maximum of another three to four months aggressively downwards,” he said.