ALL ITEMS INDEX:
The Composite Consumer Price Index (CPI) which measures inflation rose to 12.7 percent year-on-year in May 2012. The high year-on-year change could be partly attributable to persistent increase in the prices some farm produce due to the farming season, for example vegetables which are typically in short supply at this time of the year. Other notable increases were in catering services as well as the cost of some miscellaneous services, such as appliances, articles and products for personal care. However, while these items were responsible for the largest price rises, their contribution to the overall index is minimal given their relatively smaller weights in the index.
On a monthly basis, the composite CPI was higher by 0.75 percent in May 2012 when compared with April 2012. The urban inflation rate was recorded at 14.1 percent year-on-year while the rural inflation rate was 11.7 percent for May 2012. The urban All Items index increased by 0.8 percent on a month-on-month basis, while the rural index increased by 0.7 percent, when compared with the preceding month. The percentage change in the average composite CPI for the twelve-month period ending May 2012 over the average of the CPI for the previous twelve-month period was 11.1 percent, the same as the previous month. The corresponding 12-month year-on-year average percentage change for urban and rural indices was 10.5 and 11.6 respectively.
In May 2012, the level of the Composite Food Index was higher than the corresponding level a year ago by 12.9 percent. On a month on month basis, average monthly food prices rose in May 2012 by 1.2 percent. The rise in the food index was mainly from increase in the prices of vegetables (in particular), potatoes, yam and other tubers, and bread and cereals. Farm produce prices have been higher as stocks have been drawn down from earlier harvests and farmers are in the peak of the farming season, using up part of their stocks in the farming process. The average annual rate of rise of the index remained at 10.4 percent (year-on-year) for the twelve-month period ending May 2012.
ALL ITEMS LESS FARM PRODUCE
The “All items less Farm Produce” index which excludes the prices of volatile agricultural products rose by 14.9 percent year-on-year, while the average 12 month annual rate of rise of the index was 12.4 percent for the twelve-month period ending May 2012. On a month-on-month basis, the core index increased by 1.1 percent in May 2012. The rise in the “Core” index could be attributable to higher price levels in divisions that compose the index, such as clothing and footwear, gas and other fuels, transportation, and other class items such
CPI May 2012: All Items Index
12 Month Avg. Chg 11.1%
Real GDP (Q1, 2012) 6.17%
Nigeria’s economy is growing and the statistics coming from National Bureau of Statistics (NBS) are testament to the blossoming GDP. Well, this side of the story is rosy on the paper, but the other side which is the reality is that regular people are suffering with massive poverty and unemployment. The rosy economy does not reflect on the poor masses. The paradoxical outlook is pointing to the inability of the growing economy to ameliorate the living conditions of the working people.
To be conservative with numbers, Nigeria makes at least $50 million dollars daily from the export of the crude oil and investments are streaming into oil and non-oil sectors. The country’s foreign reserve is about $38.2bn and the economy is growing at second quarter at the rate of 7.3 percent. It is beginning to look that the new emerging paradigm of economic growth in Nigeria does not come with benefits. While Nigerian economic is growing at the rate of 7.3%, the unemployment is scaling at 19.7 percent according to statistics from National Bureau of Statistics (NBS). This is troubling to a nation of which 70 percent of the population is living in poverty.
Realistically, unemployment at 19.7 percent cannot be accurate. With enormous joblessness in rural areas where most Nigerians dwell, the rural unemployment when factored into the equation together with the alarming unemployment among our youths, the unemployment figure from NBS cannot be accurate. The jobless economic growth poses a great trouble to policy makers in the country and they must be scrambling to do something about it. Even the Minister for Finance Olusegun Agaga is disappointed with the inconsistencies of the economy, he said, “the paradox of a growing GDP at the same time as we are witnessing growth in unemployment, which is most severe on youth in urban areas.” The Honorable Minister Agaga has good intentions but his options are limited.
“However in the same period, the national unemployment rate has risen annually, from 11.9 per cent in 2005 to 19.7 per cent in 2009, according to the National Bureau of Statistics,” said Minister of Finance Olusegun Agaga. He further acknowledged that real GDP of the country has been thriving at sound footing consecutively for previous five years, measuring at six percent or higher each year between 2005 and 2009.
With global exposure of the Minister of Finance, Mr Olusegun Aganga, a former Goldman Sachs executive appointed in March by President Jonathan, he recognised that such a paradox in the economy cannot be sustainable in the sense that the alarming poverty and poor quality of existence in the country lowers the standard of living. The perilous situation is unacceptable for the youths energy must be directed to productive venture that will enhance quality of life. The quantum increase of crime and social ills associated with unemployment cannot be overemphasised.
On the inflationary trends, Wall Street Journal reported that, “Nigeria's annual inflation rate rose to 13% in July from 10.3% in the preceding month, the National Bureau of Statistics, or NBS, said on its website. The higher inflation rate was attributed to the rising prices for food items like yams, potatoes, meat, fish, cooking oil and fresh tomatoes. Nigerian inflation stood at 11% in May, 12.5% in April, up from 11.8% in March. It was 12.3% In February and January, and 12% in December 2009. Nigeria slowed inflation for most of 2006 and 2007, achieving a single-digit rate.”
The observation that is gaining momentum is that monetary policy has run its course and its application to resolve and control inflation is waning. Nigerian policy makers must look outside the conventional solution particularly on the usage of monetary and fiscal policies to restrict inflation. The next bold move is to strengthen economic output in the country. This not the clamping down on foreign imported goods but to gradually increase the incentives to attract local investors to start manufacturing in the country and raising the raw materials from the country. The key is to encourage local investors who know the terrains of the local economy to rise to the occasion of satisfying the final consumers.
The budgetary location at the tune of N704 naira has been release to the state and local governments. “Nigeria sold 126.46 billion naira of 20-year, 5-year and 3-year sovereign bonds at its eighth debt auction of the year, the Debt Management Office (DMO). It sold 41.64 billion naira in the 20-year papers, 42.33 billion in the 5-year bonds and 42.49 billion naira in the 3-year instruments at an auction. The amount raised was 20 percent more than the 105 billion naira the debt office initially proposed to auction.”
Reuters reported that “Nigeria sold 5-year and 3-year sovereign bonds at its eighth debt auction of the year” and it was confirmed by Debt Management Office (DMO). Nigeria was reported selling 42.49 billion naira in the 3-year, 42.33 billion in the 5-year bonds and 126.46 billion naira of 20-year. Earlier, Nigeria sold through DMO 42.49 billion naira in the 3-year instruments, 42.33 billion in the 5-year bonds and 41.64 billion naira in the 20-year papers. “The marginal rate on the 3-year bonds rose slightly to 7.54 percent from 7.48 percent last month, the 5-year paper was up to 9.25 percent from 8.85 percent and the 20-year bonds climbed to 11 percent from 10 percent.”
There is no doubt that Nigeria is fast becoming bullish in selling bonds to raise money. Nigeria must realize one essential component of issuing bonds is the unflinching commitment to honor the debts when they attained maturity. DMO may be hearty and excited to be selling those bonds but they have a big work for them in near future. Debt Management Office (DMO) has to justify the issue of the bonds and to make sure that no scandal or mismanagement will lower Nigerian financial ratings from Standard and Poors. The money raised by Nigeria must be prudently invested with probity and transparency to bolster the confidence of the market.
Naira is hovering at slightly below and above N150.70 to dollar, which is not really bad. The demand of dollar is quite high at the local market which can justify the weakening of naira which can be compensated by the monthly sales of dollar by big energy companies. The foreign reserve which stood $38.2 billion can act as a war chest to safeguard the value of naira.