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Displaying items by tag: Inflation

Nigeria inflation rate in 2013 continues to be below 10 percent for the fourth month in a role. According to the numbers coming from The National Bureau of Statistics (NBS), the 2013 April inflation rate stood at 9.1 per cent, much higher that of March 2013 which was 8.6 percent.


"Sanusi and his gang at Central Bank of Nigeria have made it their agenda to lower inflation rate below 10 percent since 2009. But that has been elusive, except in July and August 2011, when the inflation rate registered 9.4 and 9.3 per cent respectively.  Since then the inflationary trend has been surging without subsiding. This latest development has been almost four years since the inflation rate was below 10 percent. CBN must be walking on the sky for its latest achievement but this is not the time to beat one’s chest for the fight and struggle against inflation is a ceaseless battle that never ends," as Emeka Chiakwelu, Analyst at Afripol stated earlier.


And for this recent development of taming inflation rate below 10 percent, the ranks and files at Central bank of Nigeria deserved some credit for tackling inflationary trends with aggressive monetary policy, which essentially entails mopping of the liquidity without slowing down economic growth.


As for April 9.1 percent inflation rate, National Bureau of Statistics (NBS),  narrated  that: "Relative to March, the rise in the headline index could be primarily attributed to higher price levels of food products due to the effect of declining inventories. At this time in the planting season, what is sold are food products which were harvested, late last year and the limited supplies of these farm with a relatively stable demand, pushes prices higher. As in March, the Core sub-index exhibited a muted rise due to base effects. Between March 2012 and December 2012, the Core Sub-index recorded substantial year-on-year price increases (an average of 14.2% compared to 11.8% over the same period in 2011). As a result of substantially higher price levels last year, the implications are that the year-on-year changes for this year are likely to be lower. Additionally, we observed generally slower rises in monthly prices since 2013. This may be connected to more prudent fiscal measures together with aggressive stance of monetary policy. It."


National Bureau of Statistics reasoning on the rising of the inflation rate from March 8.6 percent to April 9.1 per cent of this year was illogical and disjointed. The depletion in the inventory was a result of the massive flooding that interrupted harvesting which brought a serious damage to agricultural products and farmlands. In addition scarcity and high price of petrol propel the price of staple foods and essential consumer products. The flooding made transportation fare higher due to deterioration of roads and longer time to get to the destination. All these factors brought about higher cost of delivery and subsequently higher prices that trigger higher inflation rate.


In the first quarter of 2013, the economy registered a growth of 6.56 percent slightly below the preceding fourth quarter of 2012 at 6.99 percent.


National Bureau of Statistics on the comparisons of the quarters of 2012 and 2013 stated that, "On an aggregate basis, the economy when measured by the Real Gross Domestic Prod-uct (GDP), grew by 6.56 percent in the first quarter of 2013 as against 6.34 percent in the corresponding quarter of 2012, and 6.99 in the fourth quarter of 2012 as shown in Figure 1. The nominal GDP for the first quarter of 2013 was estimated at 9,493,779.44 million naira as against the 9,142,858.51 million naira during the corre-sponding quarter of 2012. Within the two broad sectors of the economy, the non-oil sector growth was driven by growth in ac-tivities such as building & construction, ho-tels & restaurants real estate services, manu-facturing, finance & insurance and solid minerals, among others. The output in the oil sector however, decreased in the first quarter of 2013 relative to the correspond-ing quarter of 2012."



For the oil sector NBS detailed that the  "sector recorded an average daily production of 2.29 million barrels per day in the first quarter of 2013 based on data obtained from the Nige-rian National Petroleum Corporation (NNPC) as against 2.35 million barrels per day in the corre-sponding quarter in 2012.


These figures, with their associated gas compo-nents, resulted in a growth rate, in real term of -0.54 percent in oil GDP in the first quarter of 2013 compared with the –2.32 percent for the corresponding period in 2012.  During the period under review, the Nigerian oil sector witnessed some levels of disruptions as a result of pipelnie vandalisation and bunkering inci-dents with some oil companies such as Eni (Agip) declaring force majeure during the quarter. How-ever, the sector also benefited immensely from the relative stability in international crude oil market price and the exchange rate of naira against the dollar .


The Oil sector contributed about 14.75 percent to real GDP in the first quarter 2013, compared to the con-tribution in the first quarter of 2012 which was recorded at 15.80 percent, and 12.59% in the fourth quarter of 2012."


NBS also stated that  "The Non-oil sector continued to be a major driver of the economy in the first quarter of 2013 when compared with the corresponding quarter in 2012. The sector recorded 7.89 percent growth in real terms in the first quarter of 2013 compared with 8.14 percent in the corresponding period of 2012. The growth in the Non-oil sector however declined in the first quarter of 2013 when compared with the cor-responding quarter of 2012 as indicated in Figure 4. The relative decline in growth can be seen in the such activities as agriculture, telecommunications and wholesale & retail trade. On the other hand, Manufacturing, Hotels and Restaurants, as well as Building and Construction were bright spots for the economy during the reference period. In what follows, the performance of the major industries in the non-oil sector in the first quarter of 2013 is further analysed to give a better understanding of its contri-bution to the Nigerian economy."



At the moment the Central Bank of Nigeria maybe basking in the sun for the laudable accomplishment in  keeping the inflation rate below 10 percent. But CBN and financial policy makers cannot afford to rest on its laurels rather must be back on the saddle to keep mapping out the strategy for the long term maintenance of low to moderate inflation rate. Keeping inflation rate   below 10 percent and even lower at 4 or 5 percent will be an omen that Nigeria is consistently winning the battle against inflation with sustainable, durable and good microeconomics fundamentals that will enhance and strengthened investors and capitalist faith in the country’s economy.


The interest rate at 12 percent should not be permanent fix on the monetary policy as  tinkered by Sanusi and the rest of monetary committee. A high interest rate is not the best method to encourage and propel local enterprise and capital growth in the country.  Interest rate at 12 percent will discourage borrowing especially among small and new marketers. Nigeria will not be obsessed with foreign investors at the expense of its local investors and rising business owners. It is intrinsic and necessary for the policy makers to utilize monetary policy and fiscal policy to stimulate trade and industry to the advantage of local investors who creates most of the jobs in the economy.


High interest rate at 12 percent does not incentivize local producers and business community to borrow more and invest in their industry and craft. More or less   the higher interest rate contradicts growth policy and subsequently may lead to economic contraction as less business is developed. Therefore with less indigenous economic development comes more unemployment, which does not bode well for a country struggling to maintain sound macroeconomic stability.


In overall the Nigeria economy continues to show healthy growth according to the statistics coming from NBS. But the higher unemployment among Nigerians and increasing poverty are indications that the economy is not growing fast enough to absorb the unemployed and to lift Nigerians from poverty.


The needs to provide durable and sustainable infrastructures are the greatest challenge to the leaders and policy makers of Nigeria. The increasing lawlessness which includes vandalism, kidnapping, terrorism and indiscipline are wrong recipes and condiments for sustainable economic growth.




Published in Stevie C. Chiakwelu

Commentary and Analysis


The recent statistics coming from the country’s National Bureau of Statistics (NBS) recorded an inflation rate of 9 percent in January of the first quarter 2013.  The drop from 12 percent inflation rate of December 2012 to the new low at 9 percent is a breakthrough for Central Bank of Nigeria (CBN).


According to NBS, “The relative moderation of the Headline index from 12.0 in December to 9.0 in January could be largely attributed to base effects- These are as a result of higher price levels in the previous year, which imply that the year-on-year changes exhibited this year will be muted. In particular, the Nigerian economy exhibited several shocks in January 2012. The partial repeal of the Premium Motor Spirit (Petrol) subsidy led to increases in transportation costs as well as secondary effects, as the transportation costs affected both food and non-food prices. There were also the civil protests which followed, and the man-made price gouging during the month, as merchants tried to take advantage of temporary shortages. The resulting base effects – the relative lower rise in year-on-year changes exhibited in January 2013- is particularly noticeable in the decline in the Core index, decreasing to 11.3 per cent in January (from 13.7 per cent in December).”


“In January, the composite Food Index increased year-on-year by 10.1 per cent to 142.3 points. The year-on-year change was marginally lower than the 10.2 per cent recorded in December, “ as stated by the record from the NBS. The unrealisable fear was the recent flooding in different parts of the country would have impel a higher increment in the prices of food items, principally those food stuff that are being transported over a long distances from central belt of the country to eastern part and vice versa.


Sanusi and his gang at Central Bank of Nigeria have made it their agenda to lower inflation rate below 10 percent since 2009. But that has been elusive, except in July and August 2011, when the inflation rate registered 9.4 and 9.3 per cent respectively.  Since then the inflationary trend has been surging without subsiding. This latest development has been almost four years since the inflation rate was below 10 percent. CBN must be walking on the sky for its latest achievement but this is not the time to beat one’s chest for the fight and struggle against inflation is a ceaseless battle that never ends.


In May 2008 the inflation rate stood at 8.7 per cent, and that was achieved by Soludo’s Central Bank of Nigeria. But this was before the debacle of the country’s financial houses; when the banks failed and there was a credit crunch that hampered liquidity in the economy. To rescue the banks and liquefy the monetary base, the Sanusi’s Central Bank of Nigeria (CBN) introduced a reformed that called for the banking re-capitalization at the tune of N600 billion naira ($3.96 billion).


The recapitalization and massive flow of investments into Nigeria Stock Exchange and non- oil sector of the economy did contribute to the surging of inflationary trends. The monetary policy of the tightened and mopping of the liquidity can go so much and do so much. The reining in of inflation may not necessarily be a success by the application of an aggressive monetary policy coming without consideration of a complimentary fiscal policy from the presidency.


Before President Goodluck Jonathan partially removed the fuel subsidy, Nigeria’s inflation rate was hovering at 10.3 percent in December 2011. Afterward in January 2112 it etched up to 12.6 percent and Sanusi's Central Bank of Nigeria (CBN) predicted that inflation rate would reach up to 14.5 to 15. The impact of the fuel subsidy removal which contracts disposal income with the rising price of the food and fuel products were contributing factors in the upward inflationary trends.


Why the drop?

The dropping of Nigeria’s inflation rate to 9 percent was due to the tinkering with the CPI calculation due to the partial removal of the fuel subsidies. And fuel subsidies were no more part of the CPI calculation . Therefore there was nothing special that CBN did but to rely on the removal of fuel subsidies to do the trick for them.


The partial fuel subsidy “led to increases in transportation costs as well as secondary effects, as the transportation costs affected both food and non- food prices,” as NBS stated in its report. There is no single economic indicator that affects Nigerian economy more than gasoline.  The economy is run on petroleuml, from transportation of  the people to the delivery of goods and services to the market, petroleum products are engine of development.


With the country’s interest rate at 12 percent, the streaming into the economy of the so-called ‘Hot money’ may not necessarily be so much good for the economy. The pouring, influx and uncontrollable investments in the Nigeria Stock Exchange have the propensity to overheat the economy and trigger higher inflation. The policy makers especially those at the country’s apex bank- Central Bank of Nigeria should be vigilant in monitoring the state of investments in the capital market.

Andrew Bowman, writing in the Financial Times of London made the point ravishingly on the illustration of the ‘hot money’ impact on the country’s growing economy:


“Even as foreign inflows into the country hit a two-year high in January, the central bank said it was not concerned about the risks arising from this potentially volatile influx – though that might change if flows continue to grow at their current pace.


Gross portfolio inflows of $13.4bn in 2012 were nearly triple the 2011 total of $4.51bn, and have pushed up the prices of Nigerian bonds and equities in recent months. Monthly inflows for January 2013 were $2.38bn, a two-year high according to the central bank.

The rush of funds into emerging markets as a result of loose monetary policy in major developed economies has caused many economists; including some in Nigeria, to voice concerns about asset bubbles which could deflate suddenly should flows reverse.”


This is why it is imperative that a close look should oversee a prudent regulation of the monetary policy and not to be slipshod and waited until IMF issue a precaution on the management of the monetary policy by CBN policy makers.


In 2011 after Sanusi's CBN has steadily increased the interest rate by 575basic points to counteract the surging inflationary trends, International Monetary Policy (IMF) cautioned CBN to loosen its hold on its tightening policy.  And since then CBN has left interest rate at 12 percent for eight uninterrupted times.


The Central Bank of Nigeria's tightening policy against inflation has a limited effect. It is a shame that even with the waning of the monetary policy; the policy makers have not sought for other viable alternatives to curb inflation. There must be a complimentary action that must come from the presidency and Legislatures to make the monetary policy coming from CBN successful. Fiscal and monetary policies must be synchronized and be complimentary of each other.







Nigeria's Inflation eased to 12.7 percent in May  from previously 12.9 percent


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.




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

Month-on-month   0.75%

Year-on-Year        12.7%

12 Month Avg. Chg 11.1%

Unemployment       2011

National                 23.9%

Rural                     25.6%

Urban                   17.1%

Male 23.5%

Female 24.3%

Real GDP (Q1, 2012) 6.17%

















Inflation rate at 12.9%, Central Bank of Nigeria (CBN) retains interest rate at 12 percent. But economic activities are becoming unpredictable.

The two-day meeting of Central Bank of Nigeria's Monetary Policy Committee (MPC) ended with a lukewarm outlook, projection and pronouncement on the state of the economy by the Governor Sanusi, the head of the country's apex bank. Sanusi noted that national economic growth may encounter some hiccups in the absence of "structural reforms". The head of the country's Reserve institute buttresseed his comment by pointing to the slight reduction of the economic growth from 7.45 percent in 2011 to the projected 6.5 percent for 2012.


It may not be fair to the monetary policy committee to ascribe the two-day summit as futile and ineffective but that may be the case. Before the meeting there were already standing facts that remained unchanged. At a whopping 12 percent interest rate, even at the face of the surging inflation rate at 12.9 percent, Central Bank of Nigeria (CBN) cannot afford to jack-up the interest rate.


The tightened of monetary policy to mop up liquidity in the monetary base may have become unresponsive and waned. Therefore monetary policy committee retained the monetary interest rate at 12 percent. The further hiking of the interest rate may result into unintended consequences. A higher interest rate may probably appreciate capital market, but at same time, it will constrict credit and liquidity in the hands of business community. And such a scenario and development comes with the slow down of economic growth. It is beginning to look like, that the interest rate at 12 percent is gradually slowing down economic growth.


Moreover the further intensification of liquidity mopping can result in the slowing down of the economy.  The only alternative left to the monetary policy committee is to look beyond tighten of monetary policy. The executive arm of the government should inject fiscal policy to complement the actions of the monetary policy committee. Sanusi was underlining the forthcoming weakness of the economy, emphasizing the needed structural reform of the economy. Sanusi was probably alluding to fiscal policy application.


When Asia was experiencing higher inflationary rate in 2011, at a point monetary policy tightening was becoming waned, HSBC Global Research advised Asia to tighten fiscal policy. HSBC Global Research stated that:


“Monetary policy, in its usual form, no longer works. Raising rates simply draws in more capital, leaving financial conditions highly stimulative. Currency appreciation, of the size needed to cut off those funds, would be too disruptive. Capital controls could square the circle, but these are never watertight. Meanwhile, to some, regulatory tightening has become a valid alternative, yet this is difficult to calibrate and best serves as a complementary, rather than primary, tool to tackle inflation. In short, the hands of central bankers are tied.”




The slowing down of the economy may be partially attributed to lack of structural reforms as was enunciated by Sanusi. But the crust of the matter was the partial removal of the fuel subsidy that brought about the increase of cost of living and production. The country's economy is run on fossil energy and by removing the subsidy it triggered higher inflation rate which now stood at 12.9 percent. Sanui's Central Bank of Nigeria (CBN) anticipated inflation rate to rise and hover between 14-15 percent in 2012 but that will not be so. With the economic trends and the way things are going inflation rate will accelerate over 15 even up to 16 percent by the end of the year.  And if the fuel adjustment program continues and the total removal of fuel subsidy becomes imminent the inflation rate may rise above 16 percent. With such an increase in the inflation rate, the country's economy will definitely slow down even below the projected 6.5 percent for 2012.


Nigeria has not yet appreciated how fickle the economic growth and inflation can become. The targeted mission of the policy makers both at CBN and presidency should be to maintain a healthy balance between monetary and fiscal policy in order to checkmate inflation and safeguard economic growth. There is so much CBN can do with the tinkering of the interest rate and with quantitative easing. These monetary tools are limited in action when faced with an accelerating inflation trends and undiversified economy like that of Nigeria.


The state of the country is becoming un-conducive for a sustainable economic growth apart from oil sector of the economy. The growth in agriculture is expected to "declined to 4.15 per cent compared with 5.54 per cent in Q1 of 2011 and 5.74 in fourth quarter 2011," as CBN governor said at the end of the two-day meeting. And “crude oil production was estimated to have declined by 2.32 per cent in quarter one 2012 compared with the decline of 2.41 per cent in the corresponding period of 2011. Non oil real GDP growth estimated at 7.93 per cent in Q1 of 2012 was much lower than 8.73 per cent recorded in Q1 of 2011.”

This is not good news for Nigeria. The social unrest and political turbulences are making investors anxious and their comfort level and commitment on Nigeria's economy is diminishing. This will encourage capital flight and fear for investing in Nigeria, moreover indigenous capitalists may even recoil their commitment for further capital investments in the economy.


The only good news coming from Sanusi's CBN is the Nigeria’s external reserves which increased from $36.66 billion in April to $38.72 billion in May.  The buildup of the reserve is a good thing. Reserve can become a war chest against currency speculators and Naira appreciation can be enhanced with an increasing foreign reserve. But it is important that some of the resources coming from the sale of oil should be diverted to Nigerian sovereign wealth fund and provision of infrastructures.  Nigerian sovereign wealth fund should be investing in a well tested market where risk is at lowest minimum for a good return to the country.


The legislature move to remove the autonomy of the Central Bank of Nigeria (CBN) is a bad news. The country needs an independent monetary policy institute that does its job without control from the executive and legislature. Look around the world there is no advance and developed economies without independent Central Banks. When the power of Central Bank is compromise and weakens by outside interference, investors trust on the economy will virtually dissipate and disappear. The decisions and monetary policy coming from Central Banks will not be acceptable as real when Central Bank depends on the whims of the executive and legislature arms of the government. The quest to remove CBN's autonomy is "no go area". A bastardized and compromise CBN is good for nothing institute, that is why that it is intrinsic that the autonomy of CBN must remained in tact.


The government must rekindle its effort to reassure investors, capitalists and citizens that protection of life and property is its utmost duty by the country's leadership. The upgrades of electricity infrastructures must be speed up for Nigerians are sick and tired of living in darkness at the dawn of 21st century. The provision of social infrastructures, political stability and quantifiable peace must be in place for sustainability of economic growth. The heavy lifting of structural reforms should come into play but the rudimentary steps to the reforms are to provide and build on the basic tools that are needed for a growing economy.


Emeka Chiakwelu is the Principal Policy Strategist at Afripol Organization. Africa Political and EconomicStrategicCenter (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa. This e-mail address is being protected from spambots. You need JavaScript enabled to view it







Published in Emeka Chiakwelu

March Inflation Rate stands at  12.1 percent, Central Bank of Nigeria (CBN) Retains Monetary Interest Rate at 12 percent

The country’s inflation rate is not subsiding and with March's surging inflation rate at 12.1 percent, the partial removal of fuel subsidy has begun to clamp down on the economy. The inflation rate of February was at 11.9 percent, and the new number for March (12.1 percent) shows that inflationary trend is gaining momentum as expected.

Food inflation rate increases from the February 9.7 percent to the 11.8 percent recorded for the month of March. The price of food stuff and products are getting higher due to transportation cost, which can be attributed to higher petrol price.  Another contributory factor to higher food prices is due to poor access to urban areas where most of the food products are consumed.  As a result of bad roads and poor transportation routes, farmers and commodity brokers accumulate more expenses which aided to spike the price of food.

The analyst at National Bureau Statistics (NBS) stated that "The increase in the headline index, composed of the core and food indices, partially was due to the planting season which increased the price of food products in the market, and an increase in prices in the economy,” but that cannot be factored without acknowledging the higher cost of transportation. Fuel cost more due to the partial removal of subsidy and the market is therefore adjusting to the new development and reality.

Reuters reported that "Nigeria sold a total of 140.61 billion naira ($893.33 million) in treasury bills ranging from three months to one year, with yields fell across the board after a heavy subscription by local and offshore investors, the results of the auction by central bank showed. Nigeria sold N34.88 billion worth of the 3-month bond at a return of 13.84 percent, lower than the 14.0 percent same tenor paper was issued at the previous auction, while it sold N45 billion of the 6-month bills at 14.59 percent, compared with 14.94 percent at the previous auction."

Traders and analysts attributed the fluctuation of the bond yields, market sensibility and not performing as expected was due to increasing inflation as food and petrol geared up as a result of subsidy removal. But digging a little deeper, the rising communal insecurity due to restive Boko Haram is sending a shockwave to the market that is not being absorb quickly and easily. The GDP of the country is not affected by the unrest and the Nigeria economy is projected to grow up to 7 percent in 2012 even with the projected 14-15 percent inflation rate. Nigeria at the moment is the third fastest growing economy among the emerging nations. Nigeria was picked as a 'Breakout Nations' in a new book written by the head of Morgan Stanley’s emerging markets division, Ruchir Sharma.

The Monetary policy Committee led by CBN Governor Sanusi retained the interest rate at 12 percent and it is expected after they have raised the monetary interest rate by six percent points.  The Sanusi's Central Bank of Nigeria was aggressive in the battle to rein in the upward inflationary trends.  The IMF in the last report it issued on Nigeria's economy has asked Nigeria to cool-off on ditching-up the interest rate after the six percent points that kept the rate at 12 percent.




Source of Table and Graph:Ernst & Young


The CBN ambition of keeping and maintaining inflation rate at ten percent by tightening monetary tool has been elusive to CBN. The Reserve Bank and its managers together with its policy makers must look beyond the limited arm of the monetary tool. For at a certain point raising interest rate to tighten and mop-up money supply may have intended consequences. It may slow economic growth and may result in credit crunch.

The inertia and intellectual limitation occupying the policy makers’ mindset that inflation projection must approach 14-15 percent as a result of subsidy removal cannot be accepted. It should not be necessarily fits into that pattern when a sound decision is formulated that looks beyond the limitation of the monetary tool.

Instead of dwelling on the shortfalls of tightening of the monetary tool by frequently spiking the monetary interest rate,  a new fiscal pact can be made between the presidency and legislature that employed fiscal policies that will complement the monetary application coming from the Central Bank of Nigeria (CBN).

"The naira retreated against the dollar after Central Bank of Nigeria Governor Lamido Sanusi said an increase in March inflation was within estimates, adding to speculation that rates will be kept on hold. The currency of Africa’s biggest oil producer fell 0.2 percent to 157.405 per dollar on the interbank market as of 11:53 a.m. in Lagos, the commercial capital. The naira has gained 3.1 percent against the dollar this year, according to data compiled by Bloomberg," as was documented by Bloomberg’s Chris Kay.

The point must be succinctly made that the value of a nation's currency is chiefly determined by the economic wellbeing which is principally the nation's GDP.  Although Nigeria's economy is steadily growing with a reasonable foreign debt but the economy is not sufficiently diversified. In this case, Nigeria’s source of revenue comes primarily from export of oil and with limited foreign reserve the speculators are having a field day with naira. At the moment the value and recent appreciation of naira is attributed to the selling of dollar by CBN and oil companies. Therefore naira value is conditional and does not rest on sound strategic planning and outlook.

The recalibration or rebasing of Nigeria's economy by 40 percent with a methodological calculation that "would bring Nigeria's economy up from a current IMF estimate of $270 billion for 2012 to about $375 billion — just behind South Africa's, expected to be around $390 billion by the end of 2012," as reported by Reuters cannot rectify the fundamental problems of naira, inflation and unemployment. It enhances the image of the nation without much of anything.

The executive arm of the government could utilize fiscal policy tools including taxation, import duties and others to control inflation and the value of naira. Moreover, the provision of infrastructures especially electricity, roads and security apparatus should attract investments and capitals that can have a positive effect on inflation and on the value of naira.


Published in Emeka Chiakwelu

Unexpected Nigeria's inflation rate at 11.9% despite fuel subsidy removal

The inflation rate in Africa's most populous nation and second largest economy slowed down a little bit at 11.9 percent in February. It came as a surprise as the prevailing view stated that inflation will skyrocket due to partial removal of the fuel subsidy by President Goodluck Jonathan on January first of this year. Before the fuel subsidy removal inflation rate was hovering at 10.3 percent in December 2011. While in January it etched up to 12.6 percent and Sanusi's Central Bank of Nigeria (CBN) predicted that inflation rate would reach up to 14.5 to 15 percent this year before it moderates to 10 percent in 2013.


Surprisingly, inflationary pressure is gradually winding down and 11.9 percent inflation rate shows that the devastating impact of fuel subsidy removal as expected was not biting so deep. The deflating price of food price index was the principal reason for the slowing inflation. The record from National Bureau of Statistics (NBS) shows that food price index decreases from 13.1 percent in January to 12.9 percent in February. And this minor alteration in the food index does have a profound effect on the state of inflation because it accounts more than 50 percent of consumer price index (CPI). In the determination and tabulation of inflation rate the essential tool is consumer price index which constitutes the prices of foodstuff and consumer products including petroleum products.


The impact of the fuel subsidy removal which contracts disposal income with the rising price of the food and fuel products is a reality. Testament is seen when compared to the recent 12.9 percent food price index to that of last year which stood at 12.1 percent before the removal of fuel subsidy.



Sanusi's Central Bank of Nigeria (CBN) retains the interest rate at 12 percent. That comes  as no surprise after raising interest rates consecutively for six percentage points in a role to aggressively checkmate the rising inflationary trend and to reverse the losing value of naira. The Central Bank of Nigeria and its members of the Monetary Policy Committee (MPC) have no need at this time to raise interest rate. The executive arm of the government is working with country's parliament to rein in spending in the current expenditure and for the country to live within its means.


International Monetary Fund (IMF) in its recent review of the country's economic activities urged the Sanusi's CBN to desist from the jacking up of the interest rate. The further tightening of the monetary tool to mop up liquidity maybe waning without any fiscal pact with the executive to contribute in taming inflation and sizing up naira value.




Nigeria's Rising inflation rate at 12.6% may dampens economic growth

The latest number released by Nigeria’s National Bureau of Statistics on the rate of inflation in first quarter of this year stood at 12.6%.  The market was not much surprise of the rapid rise of inflation rate in the country knowing quite well that partial removal of fuel subsidy did trigger higher inflationary trends. But the market was expecting something slightly below the recorded 12.6 percent. The inflation rate recorded at the fourth quarter of last year was 10.3 percent in December, although the rising inflation rate was anticipated but danger lies in its propensity to freely escalate. This is going to pose a major problem to Sanusi's Central Bank of Nigeria (CBN) that is already standing with one leg. CBN option to fissile out the growing inflationary pressure on the economy is to tighten its monetary tools.


The application of the monetary tighten policy has its limitations and may have become to wane. How much more can you mop the monetary base liquidity by jacking up interest rate?  At the last gathering of monetary policy committee, Sanusi's CBN retained the benchmark interest rate at 12 percent. Now with this latest number on inflation rate at 12.6 % coming from National Bureau of Statistics, Sanusi and his people at CBN will not fold their hands and do nothing. At least they will make an effort to reassure the market that they are on top of the situation without injecting jittery into the economic community.


At this time Central Bank of Nigeria is inclined to be prudent on what do with the interest rate - to retain it at 12 percent as they did last time or to aggressively increase it to checkmate the rising inflation rate next time they meet. That is a difficult call to make; for upward raising of the benchmark interest rate beyond the 12 percent may have a reverse effect and dramatically slow down the robust growing economy. Nigerian economy is in a robust momentum and is expected to grow up to 6.7- 6.9 percent this year below the earlier expectation. The higher inflation triggered by the partial removal of fuel subsidies has reversed the higher predicted economic growth.


Therefore with high level of poverty in the country and large unemployment rate, the last thing CBN wants to do is to slow down the economic growth. But it is beginning to look like that might be  the  last resort if it sticks to the increasing of the interest rate expect help comes from the fiscal policy of the presidency. In that case slashing spending becomes imminent and fiscal expenditure adheres to the budget constraints.


CBN supported the removal of fuel subsidy and Sanusi expected the higher inflation rate to step in when fuel subsidies were removed. The inflation rate will even go higher as subsidy removal effects kicks in. The economy of Nigeria is petroleum based: The farmers, manufacturers and service providers cost of production increases and and they will pass it down to the consumers.


CBN revealed in its forecasting that the annual inflation rate of 2012 may rise up to 15 percent and by the next year 2013 inflation will dip below 10 percent. The problem with CBN wild assertion is that it may end up being a fussy math because the economic trends was not grounded on fundamentals but on the prevailing momentum. Nigeria is on a roller coaster and that makes economic  prediction difficult. If CBN expected much a drastic rise in the inflation rate why not find another way other than jacking up of  interest rate to tame it. Again there is no assurance to say for sure that inflation will dip below 10 percent in 2013. This is beginning to show that CBN may not be grounded on logical analysis rather pointing to the direction of the wind. This scenario of chasing the wind does not portray a sound and coordinated manger of risks associated with inflation control in a turbulent economic period.



Many of the experts and financial groups that expected economic growth similar to last year 7.7 percent growth are rescinding their forecast and expectations. Bank of America- Merrill Lynch that predicted Nigeria's economy growth of 6.7 percent has curtailed it to 6.3 percent. By no means, Nigeria's robust economic growth is not bad at all when compare to the global anemic growth of 2.6 percent according to UN base forecast for 2012. Notwithstanding, Nigeria is a special case due to higher unemployment, surging inflation rate and escalating social unrest, all these factors are not recipe for rosy economic growth.


Emeka Chiakwelu is the Principal Policy Strategist at Afripol Organization. Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.   This e-mail address is being protected from spambots. You need JavaScript enabled to view it



As CBN raises Benchmark interest rate to 12 percent, inflation rose to 10.3 percent in September from previously 9.3 percent in August

Once again at the beginning of fourth quarter, the country’s Federal Reserve Bank; the    Central Bank of Nigeria (CBN) raises the monetary policy rate (interest rate) to a new high of 12 percent from previously 9.25 percent. There is no surprise with the new hike knowing quite well that CBN has been aggressively engaged in the tightening measures of its monetary policy and assiduously mopping the monetary base liquidity. But the margin of the hike at 2.75 percent from the previous rate was astounding. The capital market was anticipating at least a 10 percent hike but the muscular CBN jumped interest rate to 12 percent.

The reason given by the Governor of Central Bank, Mr. Lamido Sanusi  for the hike was to strengthen the relatively malleable Nigeria’s currency naira. Although naira is weakening but it is not necessarily in a dire straight either it is totally collapsing to require such a drastic hiking of the interest rate to 12 percent. Subsequently Naira responded and appreciated against dollar due to the aggressive move; it did rally in the market and closing good the next day after the hike of the interest rate.

Vanguard Newspaper reported that “naira opened at 157.40 against the dollar at the interbank, firming from Tuesday’s close of N158.90 and up six percent from the record low of 167.8 reached before the CBN imposed several monetary tightening measures at an emergency meeting on Monday.” It was reported that Central Bank of Nigeria (CBN) at auction market sold $519.67 million at price rate of N150 for a dollar. On the previous day before the recent interest rate hike $400 million was traded at N156.91.

Other than the strengthening of naira, the unmentioned reason for the interest rate hike might be to get the economy ready for the removal of fuel subsidies. The idea is to utilize the monetary tightening policy as bulwark from the eventual higher inflationary trends as the subsidies are removed.There is no doubt that inflation will spike momentarily for a short time as fuel subsidies become history. Although Sanusi’s CBN was mum on fuel subsidies as propelling force for 12 percent monetary interest rate, but the writing is on wall. The development buttressed that the removal of fuel subsidy is a sure banker and there is no more orbiting around it, the government has finally made up its mind.

But the move to fix naira from its fall by CBN is not sustainable for the ‘shock therapy’ cannot solve the problem of naira permanently. The Sanusi’s CBN appears to be riding on momentum rather on fundamental; Nigeria has a structural imbalance that the tickling by CBN is quite minuscule to make a long term impact on the monetary affairs of the country and the strengthening of naira. Nigerian economy is based on oil and such an economy without diversification lacks the strong fundamental to sustain a viable and strong currency. When Nigeria sits up and makes the necessary changes in the way she runs her economy, the malleability of naira can be checked. The reactionary posture by policy makers is not the panacea to the falling naira.

CBN's Sanusi

The source of foreign exchange to Nigeria’s economy is limited. The major source of dollar to the economy is through the export of crude oil and remittance coming from Nigerians in Diasporas particularly from North America.  Another weakness in the economy is its inability to sustain or hold to those dollars flowing into the economy. This is because the economy and country lack the necessary infrastructures that can hold on to the dollars in the economy. Paucity of social infrastructures, poor security and underdevelopment contributes to capital flights. The country is becoming unattractive to foreign investments and dollars.

The problem with Nigerian economy and particularly with Naira is akin to football team that never soccer a goal in matches and always loses due to lack of training and planning.Although a team might have some good players but without training, planning and coordination it will never succeed. Nigeria has intelligent men and women but it has failed to map out a pragmatic and strategic framework to transform the nation’s economy.

In September inflation rose to 10.3 percent and this shows that the tightening monetary measures employed by CBN maybe waning. There is so much CBN can do with its monetary policy and if care is to be taken the success that CBN achieved may even reverse. This is why it is important that propping of naira and the battle against inflation must come with comprehensive strategy and economic reforms spearheaded with the executive fiscal policy.

Another thing sticking out with the 12 percent hike is the underpinning contradiction coming from CBN policy makers. The appreciation of naira will result in a sharp demand of dollar and CBN may not satisfy the demand. A contradiction that arises from the strength of naira is contrary to devaluation of naira that CBN is planning for near future. It is not logical to make naira stronger, simultaneously planning to devalue the currency in near future. The withdrawal from the country’s foreign reserve to defend naira has lowered the Nigeria’s reserve from $31.75 billion at the end of September to $30.86 billion as of October 7. The battle to save naira is expensive to the country therefore Nigeria must look beyond monetary tightening measures.

Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.     This e-mail address is being protected from spambots. You need JavaScript enabled to view it


Nigeria’s grip on inflation rate is becoming consistent at third quarter with a single digit at 9.3 percent, and with an impressive economic growth rate at 7.72 percent in August. So far a significant development and good track record is brewing, for at the beginning of third quarter inflation rate was 9.4 percent in July, and the latest recorded 9.3 percent shows a slightly declining inflationary trend.

But looking at the country’s misery indicators intrinsically – overwhelming poverty and crushing unemployment; these fabulous numbers are not making impact to the suffering masses that are without jobs and are etching out a living with less than two dollars per day. Economic experience by average Nigerian, who can barely feed his family three decent square meals per day cannot correlate with the economic expansion of the country’s GDP.  Positive economic growth should fundamentally ameliorate the misery index, lest it become senseless and insignificant to the majority of Nigerians.

Before Nigerian financial and economic policy makers beat their chest and celebrate with their talking drums they should realize that the country is not yet out from the wood. The much talked removal of oil subsidy and its implementation has not been resolved and neither the recapitalization of collapsing banks has been ceased. Let’s not overlook the increasing growth in food prices, which is the biggest contributing force to the consumer inflation rate. The food inflation rose from 7.9 percent in July to 8.7 percent in August and that is not good.

With these enviable numbers on inflation and GDP rolling out from the National Bureau of Statistics (NBS), the life style and economic well-being of 70 percent of Nigerians are stagnant and deplorable. There is no adequate housing, the food prices are going beyond the reach of the poor while the scarcity of the expensive kerosene makes life unbearable.

Nigeria is in the midst of confidence building news on economy and one cannot downgrade it. With decreasing turmoil at the Niger Delta; oil production in the second quarter of this year is averaging 2.45 million barrels daily. This is an improvement compared to 2.35 barrels of the previous year with more turbulent Niger Delta.

Bloomberg reported that “Inflation in Nigeria, Africa’s biggest oil producer, stayed near the limit of a central bank target and the economy expanded 7.72 percent in the second quarter, keeping pressure on the bank to raise interest rates. The inflation rate fell for a second month to 9.3 percent, the lowest level in more than three years, from 9.4 percent a month earlier, Yemi Kale, head of the National Bureau of Statistics told reporters today in Abuja, the capital. “Much of the improvement in headline consumer price inflation can still be explained by the positive influence of domestic food prices, and this should continue in the months ahead,” Razia Khan, the London-based head of African economic research at Standard Chartered Bank Ltd., said today in an e- mailed note to clients.”

Rising unemployment

The numbers on joblessness is not forth coming and the tabulations by National Bureau of Statistics (NBS) may be misleading. The last number I saw on unemployment was 19.7 percent in 2010. The National Bureau of Statistics website is not current with the unemployment figures. The last number it recorded was 40 percent unemployment in 1992. The 19.7 percent was provided by the former minister of Finance Mr. Olusegun Aganga last year. He did acknowledge that almost half of Nigerian youths at the age group of 15-25 years were without jobs.

And with the massive unemployment devouring the youths of the country it might be fastidious to peg the unemployment at an extremely conservative number of 19.7 percent.The 19.7 percent is not a realistic number when the rural unemployment is put into consideration and effectively tabulated. Even with conservative extrapolation the joblessness in the rural Nigeria where most people live will make the tendered number laughable. The low technology and paucity of technical know-how makes the collection of data cumbersome and sometimes out of reach.

Onitsha Kerosene waiting

Writing about jobs in Nigeria, Nasir El-rufai the former minister of capital territory Abuja, could not arrived at the exact unemployment figure but nevertheless he used the official numbers and also made his own realistic extrapolation. This is the way he put it, “The jobless rates in Nigeria have not fallen. On the same day but at different functions, the Minister of Trade and Investment put the unemployment rate at 14-16 per cent, while the Finance Minister put it at 21 per cent. The actual figure may be much higher than both numbers. The millions of people with no jobs represent a serious impediment to Nigeria’s economic development.  Apart from the immense waste of the country's human resources, it generates losses in terms of lower output which results in poorer incomes and increased poverty.  It also causes social decay and inhibits national cohesion. In fact, unemployment in Nigeria is a national security threat.”

He also wrote that, “Nigeria has about 90 million people who are willing and able to work, but about 70 million of them have no gainful employment. This is an alarming figure, but when the 4.7 million people captured in the formal sector in the latest statistics from the Pensions Commission is increased by the three to four times standard multiplier to capture those in the informal sector, it means that only about 20 million Nigerians have jobs, out of a population of 162 million. This simple fact causes the country a loss of about N2 trillion annually from the absence of commercial activities that ordinarily should have taken place but did not.”

The lack of job is one thing that cannot be politicized for real people are suffering .Job creation must be initiated by government by creating the fertile environment that will attract capital and investments. Government does not necessary create jobs but does aid the private sector in making job creation possible and imminent. Nigeria’s favorable economic indicators on economic growth and inflation can become a precursor in solving the problem of unemployment.


Nigeria's inflation drops to 9.4% in the third quarter of 2011

A good and encouraging record trickled from National Bureau of Statistics that inflation rate receded to 9.4%  in July, the lowest so far in three years. This is a significant improvement from persistent inflation that was surging upward that compelled the Central bank of Nigeria (CBN) to aggressively tighten monetary policy. As of June the inflation rate stood at 10.2% and this made the Sanusi's CBN to raise the interest rate to 8.75%. There is no doubt that the monetary policy of restraining and mopping up liquidity at the monetary base aided to slow down the rising inflation.

The governor of Central Bank of Nigeria, Sanusi Lamido has promised earlier to hold down inflation rate at less than 10%, but for a while it appears futile. Therefore the apex bank of the land, CBN gets into muscular mood by increasing the interest rate at numerous times to rein in the run away inflationary trends. Many observers of Nigerian economy and market including investors were little skeptical about the usage of the aggressive tightening of the monetary policy to achieved the targeted goal.

Financial writer at Thisday, Obinna chima observed that, "The CBN had always expressed disdain for double-digits inflation rate in the country. This has seen the apex bank’s Monetary Policy Committee (MPC), adjusting various monetary policy instruments to achieve that ambition. The MPC which has operational independence in setting of interest rates in the country had increased the benchmark interest rate – the Monetary Policy Rate (MPR) four times since this year. The benchmark interest was raised from 6.5 per cent in January to 7.5 per cent in March, 8 per cent in May and to 8.75 per cent at the July meeting. Other monetary policy tools such as Cash Reserve Requirements (CRR) had also been reviewed upward."

In reality the issue of taming inflation in Nigeria must go beyond monetary policy but should involves the presidency's fiscal policy to help in the struggle to control inflation. Central Bank of Nigeria should be probably elated with the recent development as inflation now stood below 10% but the struggle is not yet over. The increasing of interest rate to dry up the market excessive liquidity in order to achieve the desired goal of restraining inflation may have a reverse effect at some point. As the interest rate increases it will dampened economic growth by making the availability of credits and loans to tighten. The scenario may once again usher in credit crunch and the financial flow of liquidity in the capital market. This is not the result that CBN is trying to achieve, that it is why a comprehensive outlook is needed to continuous wrestle down inflationary trends.

The economy is cruising at 7.9 - 8 % and that is phenomenal by any standard. The growth must be jealously protected from the rising inflation that can quickly dent the economic growth and reverse the trend. The injections of surplus money into the circulation by the bailing out of the failed banks have in the past contributed to inflation. The continuous and excessive borrowing by Nigerian government by selling of the bonds must be done in way that too much money will not overheat the economy. Nothing is wrong with a country selling bonds and T-bills to investors but the raised funds must be diligently funneled into the economy by the way of investments.

Another methodogy that can be used to checkmate inflation is for Nigeria to live within its means. By this a planned budget must be sensible and it must be successfully implemented. When a government dabbles into excessive spending that will increase its current expenditure and in the long run have untold consequences. The ramifications may come in the retarding of the economic activities and the surging of inflation rate due to excessive liquidity in the market. When Nigeria lives within its means, there will be no need to aggressively raise the interest rate to combat inflation.

When the interest rate was raised to 8.75% at end of CBN's Monetary Policy Committee (MPC) session, it issued a statement that, "The Committee observed that the inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum prices. Significant injection of liquidity from FAAC in the third quarter coupled with the impact of AMCON recapitalizing intervened banks to the tune of N1.6 trillion will both add to inflationary pressures." That is supposely the case but it is not the whole story; the excessive government spending and borrowing played a role to the state of inflation.

Investment in this case means to put money and resources on things that will enable the creation of wealth possible. Investments should go into the provision of infrastructures and social amenities that are needed by the citizens and capitalist for further creation of wealth and upliftment of the wellbeing of the society. The Nigerian government should do its best possible to provide electricity, good roads and security. The security in this case becomes imperative for the protection of life and property, which is the most important function of a given government.

But there are also coming attractions to the economy according Samir Gadio, an emerging markets strategist at Standard Bank Group Ltd that makes outlook on inflation “uncertain.”  Those coming attractions include the doubling of "the monthly minimum wage to 18,000 naira ($116) and to deregulate fuel prices, central bank Governor Lamido Sanusi said last month. Core inflation, which excludes food, will probably accelerate in the second half of the year." These activities have the propensity to increase inflation.

Nigeria must look into the cutting down of importation of food commodities especially rice that can be grown in Nigeria. The less reliance on importation, less spending and less borrowing can bode well for a sound economic standing devoid of higher inflation.







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