Nigeria’s annual inflation rose 0.72 percentage points to 16.47% in January from a month earlier, its 17th monthly increase, the statistics office said on Tuesday, as the effect of the coronavirus pandemic weighed on the index.
Nigeria is facing its second recession in five years, triggered by a coronavirus-induced crash in oil prices that has hammered state revenue, creating large financing needs and weakening the naira.
Inflation in Nigeria, which has been in double digits since 2016, worsened with the pandemic. Food prices rose 1.01 percentage point from the previous month to 20.57% in January, the National Bureau of Statistics (NBS) said.
“This rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetables, fish and fats,” it said in a report.
The International Monetary Fund this month urged Nigeria to phase out the central bank’s financing of the government deficit to reduce inflation.
The Fund said it expects inflation to stay in double digits in the absence of monetary policy reforms, suggesting an interest rate hike might be needed if inflation worsens after the central bank cut rates twice last year to try to stimulate the economy.
Nigerian officials told the IMF that inflation could reach as high as 16% by year-end due to fuel and electricity price hikes, but that the farm harvest of late 2020 is expected to ease pressure on food prices.
“We think that inflation is probably close to a peak but it will probably take until the second half of the year before the headline rate drops back markedly,” said Virag Forizs, Emerging Markets Economist at Capital Economics.
“Currency weakness and FX restrictions will continue to put upward pressure on inflation of imported goods.”
The composite food index rose by 20.57 percent in January 2021 compared to 19.56 percent in December 2020.
This rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, Yam and other tubers, Meat, Fruits, Vegetable, Fish and Oils and Fats.
On month-on-month basis, the food sub-index increased by 1.83 percent in January 2021, down by 0.22 percent points from 2.05 percent recorded in December 2020.
The average annual rate of change of the Food sub-index for the twelve-month period ending January 2021 over the previous twelve-month average was 16.66 percent, 0.49 percent points higher than the average annual rate of change recorded in December 2020 (16.17 percent).
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All Items Less Farm Produce
The “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 11.85 percent in January 2021, up by 0.48 percent when compared with 11.37 percent recorded in December 2020.
On month-on-month basis, the core sub-index increased by 1.26 percent in January 2021. This was up by 0.16 percent when compared with 1.10 percent recorded in December 2020.
The highest increases were recorded in prices of Passenger transport by air, Medical services, Hospital services, Passenger transport by road,
Pharmaceutical products, Paramedical services, Repair of furniture, Vehicle spare parts, Motor cars, Miscellaneous services relating to the dwelling, Maintenance and repair of personal transport equipment,
The average 12-month annual rate of change of the index was 10.52 percent for the twelve-month period ending January 2021. This was 0.21 percent points higher than 10.31 percent recorded in December 2020.
In analysing price movements under this section, note that the CPI is weighted by consumption expenditure patterns which differ across states. Accordingly, the weight assigned to a particular food or non-food item may differ from state to state making interstate comparisons of consumption basket inadvisable and potentially misleading.
All Items Inflation
In January 2021, all items inflation on year on year basis was highest in Kogi (21.38%), Oyo (20.17%) and Bauchi (19.52%), while Kwara (13.96%), Abuja (12.96%) and Cross River (12.22%) recorded the slowest rise in headline Year on Year inflation.
On month on month basis however, January 2021 all items inflation was highest in Oyo (4.28%), Ebonyi (3.95%) and Lagos (3.33%), while Abuja, Edo and Cross River recorded price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).
In January 2021, food inflation on a year on year basis was highest in Kogi (26.64%), Oyo (23.69%) and River (23.49%), while Ondo (17.20%), Abuja (16.73%) and Bauchi (16.37%) recorded the slowest rise.
On month on month basis however, January 2021 food inflation was highest in Oyo (4.47%), Lagos (3.86%) and River (3.11%), while Akwa Ibom (0.25%) and Bayelsa (0.13%) recorded the slowest rise with Edo recording price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate).