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You are here:Home>>Strategic Research & Analysis>>Nigeria's Inflation Rises to 12.4%
Saturday, 18 June 2011 14:08

Nigeria's Inflation Rises to 12.4%

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CBN's Sanusi CBN's Sanusi thisday

The Rising Inflation Rate contradicts CBN policy and its measures

The report coming from National Bureau of Statistics (NBS) is not a good news for Central Bank of Nigeria (CBN) because the inflation rate was reported at 12.4 percent. The recent numbers from NBS have shown that inflationary trends are not cooling down but rather are surging. The composite Consumer Price Index (CPI) stood at 12.4 percent; CPI is used to measure inflation level in the country. This is disappointing phenomena because it does not bold well neither it is conducive for economic growth. While inflation rate of month of April was 11.3 percent, the increasing rate of April has shown that CBN may be losing the battle at arresting the inflationary enemy as they promised.

The tightening of the monetary policy maybe losing its grove, and it is beginning to look that it is beyond the power of CBN's application of monetary policy that comes with tinkling of the interest rate to reduce inflation. The usage of interest rate tinkling to control inflation may has limited effect and maybe waning. Nigerian economy has structural problem that must be corrected to be able to control inflation. The importation of essential commodities with its rising prices and the rising prices of food, petroleum and accommodations are causing the rising inflation.

Obinna Chima, financial Reporter at Thisday wrote, "Worried by rising inflationary pressure in the country, the Monetary Policy Committee (MPC), which is chaired by the CBN Governor, Mallam Sanusi Lamido Sanusi, had surprisingly raised the Monetary Policy Rate (MPR) from 7.5 per cent, to 8 per cent at its last meeting. The Committee which also lifted the Cash Reserve Requirement (CRR) had expressed its desire to battle inflation which has stubbornly remained at double digits, to single digit rate.

Most analysts attributed the hike in inflation to the rise in price of some household items, building materials and rents. They specifically pointed out that the high cost in kerosene and diesel contributed to the significant rise recorded in the CPI."

National Bureau of Statistics (NBS), "The urban ‘All Items’ monthly index rose by 0.2 percent while the corresponding rural index rose by 1.5 percent when compared with the preceding month. The year-on-year average consumer price level as at May 2011 for Urban and Rural dwellers rose by 11.5 and 13 percent respectively.

"The percentage change in the average composite CPI for the twelve-month period ending May 2011 over the average of the CPI for the previous twelve-month period was 12.6 per cent. This was slightly lower than the figure for the preceding month. The average monthly food prices declined by 0.3 percent in May 2011 compared with April 2011 figure. The level of the Composite Food Index (CFI) was higher than the corresponding level a year ago by 12.2 percent."

Nigerian government has been increasing spending while at same time having large trade deficits with some trading partners due to increased spending and importation. Another source of the rising inflation may come from the massive and continuous borrowings of the Federal Government of Nigeria. Nigeria has been borrowing heavily lately in order to finance the rebuilding and renovations of infrastructures.

The myriad issues that contributed to the rising inflation including the massive amount of money injected into the circulation to ease credit crunch. The recapitalization of the failed banks and the buying of the toxic assets of the failed banks introduced equally a large sum into the monetary base.

The scarcity of petroleum products especially kerosene with the long queuing lines in Lagos and rest of the country has brought about hoarding and subsequent higher price. The refining of oil outside Nigeria and importation of petrol at this era of the global rising prices of petroleum are major contributing factors to inflation. Things of these nature and others are triggering higher inflation rate and rising inflationary trends.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last modified on Saturday, 18 June 2011 14:19

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