▪︎It’s cheering news – Uwaleke
Nigeria’s inflation has improved for the fourth consecutive month, dropping to 17.38 per cent from the 17.75 per cent recorded in June, 2021.
The National Bureau of Statistics (NBS) disclosed this on Tuesday, August 17, 2021.
According to the Bureau, the decline in the Consumer Price Index (CPI), which measures the rate of change in prices of goods and services, was due to the improvement in food prices.
The NBS also disclosed that the composite food index fell 21.03 per cent in July compared to 21.83 in June.
In May, food inflation was 22.28 per cent according to official data.
Although food prices moderated in July compared to June, NBS said the rise was due to increases in prices of milk, cheese and eggs, coffee, tea and cocoa, vegetables, bread and cereals, soft drinks, and meat.
NBS disclosed that food inflation on a year-on-year basis was highest in Kogi (28.51 per cent), Enugu (24.57 per cent), and Lagos (24.04 per cent).
On the flip side, Akwa Ibom recorded the slowest growth by 17.85 per cent, Bauchi (17.74 per cent) and Abuja grew at 16.67 per cent.
“On month on month basis however, July 2021 food inflation was highest in Kebbi (2.98%), Yobe (2.81) and Delta (1.98%), while Sokoto, Akwa Ibom and Imo recorded price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate),” the NBS said.
Reacting to the development, Professor Uche Uwaleke described it as cheering news.
His words: “It is cheering to note that headline inflation dropped again in the month of July for the 4th consecutive time since April 2021
“The deceleration in inflation rate facilitates monetary policy implementation. It is also expected to reduce the incentive for speculative activities in the forex market as more people begin to increase their fate in the domestic currency. So, the current disinflation will support the value of the naira.
“It will equally send a positive signal to foreign and domestic investors regarding macroeconomic stability in Nigeria as well as facilitate the rebound of the stock market.
“Be that as it may, the big question is whether the deceleration is sustainable considering the risks to inflation outlook which are still present.
“These include insecurity which directly impacts food inflation, the recent devaluation of the naira, flooding in many parts of the country and the likely hike in pump price of fuel following the signing into law of the Petroleum industry Bill.
“Despite the usual increase in demand associated with Sallah and other festive seasons, the drop in the July inflation rate may have been the result of onset of harvest season, CBN’s interventions in the Agriculture value chain as well as base effect.
“This appears the case since the deceleration was noticed in the food component while the core index actually increased both Year-on-Year and month-on-month basis.
“It is pertinent to note that Inflationary pressure continues to be driven by the food index at over 21% reflecting legacy factors such as transport challenges.
“This partly explains why food inflation is reportedly highest in Kogi at over 28% and lowest In neighbouring Abuja at about 16%.
“Given that the rise in core inflation may not be unconnected with high Exchange rates, the CBN should continue to ensure forex market liquidity to enhance access to forex especially now that crude oil prices are relatively high and in view of the recent suspension of forex sales to BDCs.
“And in order to increase food output and significantly bring down food inflation, the need to tackle the seemingly intractable security challenge facing the country cannot be overemphasized.”
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