According to the consumer price index report, released by the National Bureau of Statistics (NBS). On Tuesday, Nigeria’s inflation rate changed direction in February as it rose 15.7% from 15.6% recorded in January 2022. This increase represents a 0.1% point increase compared to the previous month’s rate.
Despite the support provided by the high base effect, the headline inflation inched up, reversing the previous month’s moderation on the back of the increasing global oil prices and the lingering fuel scarcity in the period under review.
While the base effect helped in the yearly food inflation (as it slightly moderated), the monthly food inflation on the other hand inched upward on the energy-driven increase in the freight cost of food products. In addition, the soaring energy prices impacted the core inflation (yearly and monthly).
The Consumer Price Index (CPI)/Headline Inflation/All Item Index
The Consumer Price Index (CPI), which measures inflation rose by 15.70% Year-on-Year (YoY) in Feb. This is 0.10% higher than the rate recorded in Jan’21 (15.60%) and 1.63% lower than Feb’21(17.33%). The headline inflation inched up, reversing the previous month’s moderation on the back of the core segment that nudged upwards. Also, on a month-on-month (MoM) basis, the Headline Index increased to 1.63% in Feb’22; this is a 0.16% increase from the rate (1.47%) recorded in the previous month. The hike in monthly headline inflation reflects the growing inflationary pressures in both the food and core subindices, attributable to the ongoing Russia-Ukraine crisis.
The Food Inflation
The Food sub-index rose by 17.11% YoY in Feb’22 compared to 17.13% in Jan’22 and 21.79% in Feb’21. However, on a MoM basis, the food inflation increased to 1.87% in Feb’22, up by 0.25% points from 1.62% recorded in Jan’22. The food inflation was largely driven by the pass-through effect of rising logistic costs. This rise in the food sub-index was caused by increases in prices of bread and cereals, Potatoes, yams, other tubers, oils and fats, and fruit.
The Core Inflation/ The All Items Less Farm Produce
The “All Items less farm produce” or “Core Inflation,” which excludes the prices of volatile agricultural produce, stood at 14.01% YoY in Feb’22, rising by 0.14% and 1.63% when compared with Jan’22 (13.87%) and Feb’21 (12.38%) rates. Similarly, on a MoM basis, the core sub-index increased by 1.33% in Feb’22, up by 0.08% compared with 1.25% recorded in Jan’21.
The highest increases were recorded in the prices of Gas, Liquid Fuel, Wine, Tobacco, Spirit, Narcotics, Solid fuels, Cleaning, Repair and Hire of clothing, Garments, Shoes and other footwear, other services in respect of personal transport equipment, Clothing materials, other articles of clothing and clothing accessories and other services.
WHAT THIS MEANS.
The recent increase in Nigeria’s inflation rate means that Nigerian purchasing power is being negatively impacted by the increase in the prices of goods and services, especially daily needs. The impact of this on savings in bank accounts and other less interest-generating means of storing wealth is that with time such funds may lose value and be worth lesser than it was in the previous month.
OUR FORECAST FOR MARCH
For the following month, we expect the prolonged fuel scarcity and geopolitical tension in Eastern Europe (resulting in increases in commodities and energy prices) to outweigh the last high base effect for the year. In addition, the supply disruptions arising from the Russia-Ukraine crisis could lead to a shortage in essential commodities items, given their significant positions in
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