January Inflation Rises For 12th Month, Hits 18.72%

In line with the predictions of analysts, Nigeria’s inflation figures rise for the 12th straight month from 18.55 per cent in December last year to 18.72 per cent in January 2016 as food prices rose.
The  National Bureau of Statistics (NBS) in its inflation release for January said the rise was driven by surges in food, transport and electricity, as a separate food index also rose, to 17.82 percent from 17.39 percent in December last year. Inflation had been steadily rising since last year January when it was 9.6 per cent hitting 18.72 per cent last month, the highest in more than 11 years.
To Afrinvest analysts, the rise in inflation was “due to a relatively lower base despite projected slower month-on-month change to 1.0 per cent from 1.1 per cent in December 2016 as the impact of yuletide season on prices wears off.”
FDC analysts on their part, linked the inflation rise to factors including seasonality effects, supply shocks and exchange rate pass through effects through export smuggling. “Christmas festive spending contributed to a surge in demand at the end of 2016, albeit marginal in magnitude when compared to previous years.
“As January approached the seasonal slur in economic activities and lower purchasing power (due to payment of tuition and post Christmas blues) kicked in. Hence, a paltry increase of 0.05 per cent in the Year-on-Year rate in January.
“Power supply, distribution and logistics costs were a major challenge for manufacturers. Diesel prices skyrocketed to an average of N270 per liter from N140 per liter in the same period the previous year. Power supply from the grid dropped sharply to 2500 MW in January leading to higher distribution and logistics costs. The Producer Purchasing index (PPI), the major ingredient of core inflation is likely to remain high.”
If all variables remain unchanged, analysts project that headline inflation will begin to ease from February 2017 due to high base in the corresponding period. Although prices may edge higher if the naira further depreciates as the feedback effect on energy (petrol and Diesel) prices may fuel further hike in general price level.”
Galloping inflation comes as country grapples with its first recession in 25 years, largely caused by the fall in global oil prices since 2014. Crude oil sales account for 70 percent of government revenue. In December, President Muhammadu Buhari presented a record N7.298 trillion budget for 2017 aimed at stimulating growth and pulling the economy out of recession. Economists have questioned whether those goals can be reached.
The soaring cost of living in Nigeria, where the United Nations estimates that 70 percent of the population live on a dollar a day, has prompted widespread anger at Buhari’s handling of the economy.