Economic crisis, job losses worsen, food prices rise

• NACCIMA worries about rising prices, says companies face tougher times

• Spike of inflation will plunge more Nigerians into poverty, says LCCI

Inflation in Nigeria reached 20 percent in August 2022, reflecting the rising cost of living facing Nigerian families and businesses.

It was the highest inflation rate since October 2005, with the annual cost of food reaching 23.12 percent, representing a 2.82 percent increase from 20.30 percent in August 2021.

On a monthly basis, inflation rose to 20.52 percent in August, from 19.64 percent in July, according to the latest Commodity Price Index report released Thursday by the National Bureau of Statistics.

The CPI measures the average monthly change in the prices of goods and services in a country.

According to the NBS, inflation was 3.52 percentage points higher than in August 2021, namely 17.01 percent.

This means that in August 2022 the general price level was 3.52 percent higher than in August 2021.

The percentage change in the average CPI for the 12-month period ending August 2022 from the average of the CPI for the prior 12-month period was 17.07 percent, an increase of 0.47 percent compared to 16.60 percent in August 2021.

According to the statistical office, the increases were recorded in all classifications of individual consumption by target departments that yielded the main index.

Rising costs

A further breakdown of the CPI report showed that urban inflation was 20.95 percent, while rural inflation was 20.12 percent. Food inflation, on the other hand, also rose to 23.12 percent.

The report also said food inflation in August 2022 was 2.82 percent higher than in August 2021 (20.30 percent).

This rise in food inflation was caused by price increases of bread and grains, foodstuffs, potatoes, yam and other tuber, fish, meat, oil and fat.

In August 2022, annual inflation for all items was highest in Ebonyi (25.33 percent), Rivers (23.70 percent), Bayelsa (23.01 percent), while Jigawa (17.3 percent), Borno (17. .56 percent) and Zamfara (18.04 percent) recorded the slowest annual rise in headline inflation.

However, on a monthly basis, August 2022 registered the highest increases in Anambra (2.78), Ondo (2.53 percent), Nasarawa (2.40 percent), while Yobe (0.68 percent), Borno (0.84 percent) ) and Zamfara (0.98 percent) recorded the slowest rise in month-on-month inflation.

The rise to 20.52, which further worsens the 17-year high reached in July, when inflation reached 19.64 percent in July, also implies a worsening of the cost of living crisis, driving the price of products and services has increased in recent months. .

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Economist blames policy

In explaining the possible causes of the continued increase in inflationary pressures, experts have identified factors such as disruption in the supply of food products, increase in import costs due to the continued depreciation of the currency and a general increase in production costs as the main drivers. cited. .

In an exclusive interview with The PUNCH, an economist, Professor Akpan Ekpo, described rising inflation as expected, taking into account the current economic realities in Nigeria.

The academic, who teaches at the University of Uyo, further stated that the excessive spending of the political class to fund their election campaigns had also helped fuel inflationary pressures. This, he said, had led to “too much money chasing too few goods”.

“I’m surprised it isn’t higher,” Ekpo said.

“That’s the problem, too much spending by politicians. The Central Bank of Nigeria is still giving the government money because they don’t know how to say ‘no’ to the government. So I don’t see inflation falling this year.”

Asked whether the Monetary Policy Committee’s decision to raise the base lending rate had helped curb the rise in inflation, Ekpo said: “What MPC is doing is raising interest rates to curb growth and investment, but it doesn’t work because our economy is not the US economy, their currency, the dollar, is both a domestic and an international currency, it’s convertible.

“In our own case, naira is not convertible. So the exchange rate gap, the gap between the official rate and the black market, is too big. Now that the exchange rate regime is being strengthened by politicians spending money, I don’t see it coming down. The MPC can comply and increase the rate, it doesn’t change anything. They’ve done it twice, but while they’re doing it, inflation continues to rise. So they have to think about setting up an investment policy.”

Ekpo also said the central bank contributed to the inflation crisis by launching too many intervention projects that indirectly pumped more money into the economy.

“They won’t say it, but they’re putting a lot of money into financing these intervention funds and that’s driving more inflation. I don’t see the price (inflation) falling this year. I’d be surprised if that’s the case,” he added.

NACCIMA, LCCI kick

The Director General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu, said in an exclusive interview with our correspondent that the benchmark of the value of the naira against the dollar would always be at a disadvantage. due to the debilitating impact of debt servicing, fuel subsidies, depletion of foreign reserves and grueling import costs.

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“The price of a TV set manufactured outside this country, expressed in dollars. The currency is losing value faster than anything else and the managers of the economy have been doing their best to stabilize the naira’s value, leading to a case where our foreign reserves have taken a hit in an attempt by CBN to to keep value artificially high. Now we have a situation where the naira is hovering between N700-N730 per dollar.

Obadimu noted that the events of the inflation surge were cyclical, fueled by excessive pressure on the national budget, which could be resolved by shifting fuel subsidies to other parts of the economy. However, he warned of the risk of taking such a step.

“Some things are cyclical and those are the fears harbored by those who fear the consequences of any attempt to end fuel subsidies.

“There is too much pressure to take the grant away to free up the budget so that some money can go into development. However, if we do, it will again have a huge effect on the naira as it will push inflation up again.

Obadimu explained that there were rumors of the lack of funds for capital expenditures in 2023 due to the growing debt burden.

Lagos Chamber of Commerce Vice President Gabriel Idahosa further spoke of the economic impact on Nigerians’ financial well-being and explained that the rise in inflation was a cause for serious concern.

“Inflation exceeding 20 percent raises serious concerns about possible runaway inflation. That is inflation that is spiraling out of control because short-term measures cannot stop it.”

Idahosa noted that the most important measures within the government framework were to stop crude oil theft and end the security situation that often prevented micro and small businesses from operating freely in many parts of the country.

He noted that “rising inflation leads to increasing poverty, as the existing income of the workers can only lead to less and less food and other necessities. It also means that many companies will lay off more employees as rising operating costs push them into lower profits or bigger losses.”

Job loss threatens

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An economic expert at Pan-Atlantic University, associate professor Olalekan Aworinde, said inflation in Nigeria was increasing at an aggressive pace, a reality that ushered in more difficult times for working-class Nigerians, many of whom lived on a fixed income.

According to the academic, Nigeria’s worsening inflation crisis would lead to a high cost of living, a low standard of living, weakened production and ultimately more job losses.

Aworinde said: “The implication for the bourgeoisie earning steady incomes is that they will suffer if prices continue to rise. Fixed income earners will suffer in terms of standard of living, and once the standard of living falls, it will certainly affect the growth of the economy as well.

“People are not able to meet the standard of living in the economy which will leave them in abject poverty and that is what we are experiencing in Nigeria. You will discover that humans are unable to provide the basic necessities of life.

“Those who employ people will not be able to produce to maximum capacity and the implication is that they will lay off some workers meaning jobs will disappear.

With the economy now, government spending will increase and the tendency to build up debt.”

Hunger, transport costs

The Chief Executive Officer, Center for the Promotion Of Private Enterprise, and former Director General, LCCI, said heightened inflationary pressures in the Nigerian economy remained deeply troubling, with inflation rising to 20.52 percent in August.

Even more worrying, he said, was the spike in food inflation to 23.12 percent.

Yusuf said: “The reality is that key inflation factors have not diminished. Some have become even more intense.

“These factors include high transportation costs, increasing logistical challenges, worsening exchange rate depreciation, forex liquidity problems, rising energy prices, climate change problems, uncertainty in many farming communities and structural production bottlenecks. These are in fact supply-side problems.”

Former DG LCCI said accelerated financing of the budget deficit by the CBN was also a major inflation driver in Nigeria. “The financing of the budget deficit has been brought to an alarming level of almost N20tn. This has huge implications for the money supply and a knock-on effect on inflation. CBN deficit financing is powerful money and highly inflationary. It’s inflation tax,” he noted.

He added: “Increasing inflationary pressures weaken citizens’ purchasing power as real incomes are eroded. It increases pressure on production costs, negatively impacts profitability, erodes shareholder value and undermines investor confidence.”

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