As food and other commodities’ prices soar by the day in Nigeria, there are reports of improving economy and dropping inflation. To consumers, the situation does not add up, writes ONYEKORMAKA ASABOR
The latest data on Consumer Price Index published by the National Bureau of Statistics, which measures inflation, Nigeria’s economy improved in May 2021.
The bureau explained that while this is 0.19 per cent points lower than the 18.12 per cent recorded in April, improvements were recorded in all Classification of Individual Consumption by Purpose divisions that yielded the headline index.
It noted, “On a month-on-month basis, the headline index increased by 1.01 per cent in May, representing higher percentage points of 0.04 than the rate recorded in the previous month (0.97 per cent).
“The percentage change in the average composite CPI for the 12 months period ending May 2021 over the average of the CPI for the previous 12 months was 15.50 per cent, showing a 0.46 percent point rise from 15.04 per cent recorded in April 2021.”
The NBS data entitled CPI Report May 2021, in a similar vein, stated that the urban inflation rate rose to 18.51 per cent (year-on-year) in May from 18.68 per cent recorded in April, just as the rural inflation rate stood at 17.36 per cent in May from the 17.57 per cent previously reported.
It reported that the urban index rose to 1.04 per cent in May – up by 0.05 per cent points on a month-on-month basis – compared to the rate recorded in April (0.99 per cent), while the rural index rose to 0.98 per cent in May – up by 0.03 points – compared to the 0.95 per cent recorded in April.
According to the report, the corresponding 12-month year-on-year average percentage change for the urban index is 16.09 per cent in May – higher than the 15.63 per cent reported in April, while the corresponding rural inflation rate in May is 14.94 per cent compared to the 14.48 per cent recorded in the previous month.
Paradoxically, to an average consumer, who understands the dynamics of inflationary pricing, at least from ordinary level economics, “Inflation is a measure of the rate of rising prices of goods and services in an economy.”
However, to Clifford Chimankpa, a restaurateur at Mowe, Ogun State, “Since the government said inflation is dropping, the prices of food are supposed to also drop.”
He is not the only one that shares the ‘ignorance’, as even those that can be adjudged to understand the dynamics of economics beyond the secondary school level were also confused when Financial Street took the issue further.
Dominic Ebong, a civil servant, says, “It is an abnormal trend as long as economics, as a body of knowledge, is concerned. When inflation falls, price ought to fall correspondingly.”
Their sentiments or rather ignorance, no doubt, cannot be misconstrued as the composite food index was reported by NBS to have risen by 22.28 per cent in May 2021 as against the 22.72 per cent reported in April 2021.
The rise in the food index, the NBS explained, was as a result of increases in prices of bread, cereals, milk, cheese, eggs, fish, soft drinks, coffee, tea and cocoa, fruits, meat, oils and fats, and vegetables.
It disclosed that the food sub-index increased by 1.05 per cent in May from the 0.99 per cent recorded in April, on a month-on-month basis.
“The average yearly rate of change of the food sub-index for the 12-month period ending May 2021 over the previous 12-month average was 19.18 per cent – 0.60 per cent points from the average yearly rate of change recorded in April (18.58) per cent,” said the report.
Financial Street gathered that the core inflation, also known as ‘all items less farm produce’, which excludes the prices of volatile agricultural produce, stood at 13.15 per cent in May as against the 12.74 per cent recorded in April.
On a month-on-month basis, the core sub-index increased by 1.24 per cent in May 2021, up by 0.25 per cent when compared with the 0.99 per cent recorded in the previous month.
NBS said the highest increases were recorded in prices of pharmaceutical products, garments, footwear, salons and personal grooming establishments and furniture.
Others are cars, hospital services, fuels and lubricants for personal transport vehicles, cleaning, repair and hire of clothing, other services in respect of personal transport, gas, household textile and non-durable household goods.
The average 12-month yearly change rate of the index was 11.50 per cent for the 12-month period ending in May – representing 0.25 per cent compared with the 11.25 per cent recorded in April.
Ostensibly throwing light into the unusual trend, an Economics lecturer, Benson Akpenvwoghene, said, “It is possible for consumers to witness the situation where inflation is seen to be dropping but prices of items in the market soaring beyond reach.
“A drop in the inflation rate means that prices are still rising, just at a slower rate. For example, in late 2008, the United Kingdom inflation rate was falling from five to two per cent. Prices were still rising at the start of 2009.”
According to him, food prices often change at a greater rate than overall inflation. “They tend to be more volatile because they are determined by factors, such as the weather, not to talk of at the moment when farmers are scared of going to farm because of killer herdsmen. Also, with inelastic supply and demand, this makes prices more volatile. If there is a bad harvest, we may see food prices rise quite. However, at the same time, the underlying core inflation rate could be falling, e.g. due to lower economic growth and a decline in excess demand.”
Ostensibly lending credence to Akpenvwoghene’s view, a statistician, Mr Onyero Onyemakonor, said, “Such situation can be caused by cost-push inflation as it occurs when prices increase due to increases in production costs such as raw materials and wages.”
He explained that while the demand for goods would unchanged, supply would decline due to higher costs of production. “As a result, the added costs of production are passed on to consumers in the form of higher prices for the finished goods.”
The World Bank Group recently published an article on its website entitled ‘As hunger rises, the World Bank supports vulnerable people now and in the future’. In the story, it asserted, “The COVID-19 pandemic has worsened food insecurity by disrupting supply chains. Together with currency depreciation and other factors, this has driven up the prices of staples such as wheat and maize. Global agricultural commodity prices are 40 per cent higher now than in January 2020.”
