Nigeria’s Economy: Inflation Hits 18.55%

inflation-increase-in-nigeriaLatest data from the National Bureau of Statistics, shows that Nigeria’s headline inflation has risen to 18.55 per cent its highest in more than 11 years.

According to the statistics office, the 0.07 per cent rise from 18.48 per cent recorded in November 2016, was driven by surges in housing, water and electricity, while the food index also rose to 17.39 per cent, against 17.19 per cent.

The December 2016 report showed that Food Index rose by 17.39 percent (year-on-year) in December 2016, up by 0.20 percent points from rate recorded in November (17.19) percent.

During the month, all major food subindexes increased, with Soft Drinks recording the slowest pace of increase at 7.66 percent (year on year).

Increases were recorded in all COICOP divisions that yield the Headline Index.

Communication and Restaurants and Hotels recorded the slowest pace of growth in December, growing at 5.33 per cent and 8.91 per cent (year-on-year) respectively.

The rising inflation comes as the country grapples with its first recession in 25 years, largely caused by the fall in global oil prices since 2014.

A second quarter report of the statistics office showed Nigeria’s economy had glided into recession, with its Gross Domestic Product contracting by 2.06 per cent, but the government has continued to assure Nigerians that the recession would be short-lived.

The latest assurance on the recovery of the economy was issued by the World Bank, with its prediction that Nigeria will get out of recession and grow its Gross Domestic Product by one per cent in 2017.

In its January 2017 Global Economic Prospects report released on January 11, the global lender said that sub-saharan African growth is expected to pick up modestly to 2.9 per cent in 2017, as the region continues to adjust to lower commodity prices.

Inflation Increase: Nigeria’s Apex Bank Advised To Mop Up Liquidity

Bie_Peterside_and_Afolabi_OlowookereEconomic analysts have advised the Central Bank of Nigeria (CBN) to consider mopping up liquidity to check the rising inflation rate.

The Head of Research and Publications, Dr Afolabi Olowookere and Mr Bie Peterside, both of the Financial Derivative Company Limited, told Channels Television on Tuesday that the increase in inflation rate that had been on for the fast five months was due to prevailing security challenges in the north-east and activities leading to the the 2015 general elections.

Mr Peterside pointed out that foreign investors had slowed down the rate of investment in the nation, as areas they could invest in at the moment were very few.

It is usual for investors to also slow down investments when an election year is approaching, in order to ascertain the political situation of the country, a situation that is apparently leading to the rise in the inflation rate.

For Dr Olowookere, the CBN should mop up liquidity to check the growing inflation rate.

“When inflation is rising the real return on investment drops. Increase in inflation implies that you are losing your purchasing power.

“So many factors are responsible for the increase. The insurgency in the north-east is contributing to the rise in price of goods that are supposed to come from the region and the election that is coming,” Dr Olowookere said.

He pointed out that the apex bank had several tools which it could use to control the inflation rate, but emphasised that the best option at the moment would be to reduce the excess liquidity in the system.

“The CBN will look at the indicators and decide what tools to use to control the inflation rate, which will all be aimed at reducing excess liquidity in the system.

“You either increase the goods that are in supply or you reduce the money in the hands of the people,” he said.

The experts further said that the increasing inflation rate was not expected to affect the exchange rate.